(Yicai Global) July 23 -- Leading Chinese automaker FAW Group will buy 5 percent of Changan Mazda, according to an informed company source, thereby facilitating the merger of Mazda Motor’s two joint ventures in China.

After FAW takes the stake in the Nanjing-based JV between China's Changan Automobile and Japan's Mazda, their stakes will fall to 47.5 percent each, the person told Yicai Global.

The trio set up Changan Mazda and FAW Mazda, the two firms set to be merged, in 2005. Hiroshima-based Mazda owns 50 percent and 40 percent, respectively. Mazda and Changan announced last month that they would sell as much as 5 percent of Changan Mazda via a capital increase.

Changan Mazda will be the surviving entity, the person said, adding that the JV will then greatly expand its product range and dealer network to promote Mazda’s business in China.

The two JVs have already informed their Shanghai dealers that they will combine soon and plan to consolidate sales channels in September, the auto traders told Yicai Global.

The merger is at Mazda’s behest. Foreign investors are bound to gradually increase control over their joint ventures as China lifts restrictions on foreign ownership and eases limits on foreign funding, a senior manager at a FAW subsidiary said earlier this year.

Mazda China sold more than 300,000 vehicles for the first time in 2017, but sales have declined each year since then. It sold 217,000 units last year, down nearly 30 percent from 2017. FAW Mazda sold 79,800 vehicles in 2020, down 12.7 percent, while Changan Mazda sold 137,300, a gain of 2.8 percent.

Editor: Tang Shihua