Strategic Acquisition and Expansion
Lentuo has entered into an agreement with a Honda dealership in Tianjin to acquire 60% of the interest of the dealer. This acquisition demonstrates the Company’s proactive response to strong demand for automobiles in China and is in line with Lentuo’s business development strategy to expand its 4S dealership network into surrounding areas of Beijing. We believe that the acquisition will enhance Lentuo’s targeted market positioning. Pending completion of the acquisition, we expect not only to have a controlling interest in the Tianjin dealership but to gain a powerful strategic ally who will serve as the junior partner in this joint venture. The junior partner will be committed to helping Lentuo expand into Tianjin, a major metropolitan market, in a rapid and cost-effective manner. We expect to close this transaction within the second quarter of 2011.
The Company believes acquisitions will be a significant source to grow our business in the future. We plan to continue to purchase franchises that enrich our business portfolio and generate attractive returns for the Company and its shareholders. We will continue to seek good acquisition targets and are pursuing other acquisition opportunities in geographies other than Tianjin as well. We remain confident that we are on the right track to fulfill our mid-term expansion plan to add another 10 stores to our widening national operations.
Lentuo has initiated the construction of a FAW-VW dealership store in central area of eastern Beijing. We expect construction to be completed by June 2011. As we observe increasing demand for premium passenger vehicles to be a long-term trend among the growing number of China’s affluent households, we expect a limited impact on China's premium car segment due to Beijing’s new quota system. In addition, the prime location of the new Beijing store will be a key competitive advantage for us in this market--both in terms of repair and maintenance service and new car sales.