• Bloomberg

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Fuji Heavy Industries Ltd., the only Japanese automaker without Chinese government approval to start a joint venture, has put efforts on hold to build cars in the country, where demand growth is slowing.

Sales in China would not be enough to guarantee profitability, Akira Mabuchi, executive vice president in charge of the company’s China project, said last week. The maker of Subaru cars won’t start local production “even if the Chinese government approves” its planned carmaking venture with Chery Automobile Co., he said.

Fuji Heavy, the nation’s best-performing carmaker last year, is showing declining interest in the world’s largest auto market, where vehicle sales growth slowed to 6.9 percent last year, from 14 percent in 2013. China’s economy is forecast to expand at the slowest pace since 1990 this year.

“Since the profits are split with your partner, you would have to double the sales to maintain the profits you earn by exporting from Japan,” Mabuchi told reporters. China requires foreign carmakers to form ventures with local companies.

The carmaker surged 43 percent in Tokyo trading last year and its shares are up more than ninefold since 2011. Investors have bid the shares higher partly because, unlike its biggest rivals, Fuji Heavy had no production in China. Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. suffered sales declines in 2013 in China after a sovereignty dispute with Japan led to a consumer boycott.

Subaru’s engineers are focusing on boosting output at its U.S. plant, Yasuyuki Yoshinaga, president of Fuji Heavy, said in a November interview. China remains a candidate for building a plant, although that wouldn’t happen before the current midterm plan ends in 2020, he said.

Subaru sales fell 2 percent to 55,000 units in China last year. It aims to raise deliveries by 10 percent to 60,000 in 2015, beating the projected industrywide growth of 7 percent.

Chinese authorities had balked at Subaru’s proposed Chery alliance because Toyota, which already has the maximum of two joint ventures in China, is Fuji Heavy’s largest shareholder, with a 16.5 percent stake.

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