SAIC Motor Corp (600104.SS), China's top automaker, said on Thursday it will raise up to 10 billion yuan ($1.5 billion) through a share placement largely to shore up its own-brand cars and commercial vehicles to help secure its leading position in the world's largest auto market.

As wealth grows in the fast-expanding economy, many Chinese carmakers are looking to boost their profile to cater to an increasingly patriotic population who, if given the choice, prefer to buy quality local products.

SAIC, which operates car ventures with General Motors [GM.UL] and Volkswagen (VOWG.DE), is virtually the only domestic player that has made some inroads into segments where Buick, Passat, Accord and Camry models prevail.

"SAIC has had some success in selling cars bearing its own brands. But it needs more input to broaden its portfolio, which still lacks SUVs and MPVs," said Lin Huaibin, an analyst with IHS Global Insight.

The maker of Roewe 550, a model popular among the young professional elite, aims to double sales of its own-brand cars to 180,000 units this year, rising further to 500,000 units in the foreseeable future. [ID:nHKG265513]

To build on its success, SAIC needs more capacity and new models to further differentiate it from domestic rivals and narrow the gap with foreign auto makers, industry observers said.

SHARE PLACEMENT

SAIC said in a statement it planned to issue up to 900 million new shares to no more than 10 select investors, including its state parent, at no less than 11.47 yuan per share, or a 4.9 percent discount to its last close on June 18, when the shares were suspended.

Its parent has pledged to buy up to 10 percent of the issuance for no less than 1 billion yuan and will hold the shares for three years. Other investors must hold the shares for a year.

Roughly 6 billion yuan of the proceeds would be invested in its own-brand cars, with 1.2 billion yuan earmarked for commercial vehicle projects.

Another 2.8 billion yuan will be invested in the second phase of its research and development centre, while the reminder will be spent on an auto parts project.

Analysts attributed SAIC's choice for a share placement rather than public offering of new shares to a slumping Chinese stock market, which is bracing for Agricultural Bank of China's [ABC.UL] more than $20 billion IPO.

"It is not hard for a company like SAIC to find institutional investors. The lengthy approval process for public new share offerings and cautious market sentiment also make share placements a more convenient vehicle," said Chen Liang, an analyst with Huatai Securities.

SAIC's shares have dropped about 40 percent this year, underperforming a more than 23 percent fall in the benchmark Shanghai Composite Index .SSEC over the same period. ($1=6.811 Yuan) (Reporting by Fang Yan and Jacqueline Wong)