SHANGHAI Automotive Co Ltd, the listed unit of Shanghai Automotive Industry Corp, is likely to sell additional shares to fund the purchase of its parent's assets, part of SAIC's plan to seek a back-door listing, according to people close to the deal.

The automaker aims to produce 600,000 of its self-designed cars by 2010, including 200,000 self-designed passenger cars and 400,000 commercial vehicles.

The Shanghai-listed Shanghai Auto suspended trading of its shares yesterday, adding important information would be disclosed later, according to its statement filed to the Shanghai Stock Exchange. Its shares ended at 5.65 yuan (70 US cents) on Monday, 1 percent lower from the previous session.

Shanghai Auto may plan to sell additional shares to existing shareholders or institutional investors to finance the purchase of more core assets from SAIC, including SAIC's stakes in its two joint ventures with General Motors Corp and Volkswagen AG. Assets of SAIC Motor Manufacturing Co that develops SAIC's own cars and SAIC's auto financing business will also be injected into the listed unit, Zhao said.

SAIC, China's second-largest automaker, owned 30 percent of Shanghai General Motors Corp and 50 percent of Shanghai Volkswagen Co Ltd.

"The move would increase the competitiveness of Shanghai Auto with more high quality assets to attract investors," said Hu Song, an analyst from Haitong Securities Co Ltd.

He estimated that after the additional sale of equities, Shanghai Auto's outstanding shares would double to 6.6 billion yuan with net assets worth 20 billion yuan (US$2.5 billion), which will enable Shanghai Auto to be the largest listed unit in China's auto and manufacturing industries.

The earnings per share may also increase to 0.45 yuan or 0.5 yuan from a previous projection of 0.4 yuan, according to Hu.

Shanghai Auto has invested in more than 20 auto-parts manufacturing enterprises in addition to a 20 percent stake in Shanghai General Motors Co Ltd.

"The raised money would also lay a solid basis to fund SAIC's ambitious development in the automobile industry," Hu said.