China

Great Wall Motor Confirms Interest in Purchasing Jeep Brand

Summary:

  • Great Wall Motor (601633.SS/2333.HK) has confirmed its interest in purchasing Jeep’s SUV brand, as reported by Sina.
  • Wang FengYing, the chairman of Great Wall Motor, also mentioned the company has not yet sent an offer or talked to FCA Group, the parent company of Jeep.

Why It Matters:

  • Sina suggests that Great Wall Motor has a strong incentive to acquire the JEEP brand. Currently, Jeep is the only brand which sells more than 1 million SUVs per year and Great Wall Motor could leverage Jeep’s technology to improve its own brand of SUVs.
  • However, Jeep might be too big for Great Wall Motor to acquire. The valuation of Jeep could reach US$ 33.5 billion but the total assets of Great Wall Motor were only US$ 13.9 billion at the end of 2016. Although Great Wall Motor recorded a 26% growth in sales, this growth might still not be sufficient to support the purchase.
  • The Chinese government’s control over foreign reserves might be another hurdle, even if Great Wall Motor can find banks prepared to finance the deal. The government’s controls are so strict that even state-owned companies find it difficult to acquire overseas companies.