SHARES of Pang Da Automobile Trade Co ( 601258.SH)tumbled 7.4 percent yesterday on concerns that the company's failed bid for Saab Automobile AB may cause great losses.

Pang Da yesterday said it has dropped its takeover bid for the Swedish carmaker, which filed for bankruptcy on Monday, according to its statement on the Shanghai Stock Exchange.

Pang Da and China's Zhejiang Youngman Lotus Automobile Co had struck a 100-million-euro (US$130.88 million) deal to buy all of the shares of Saab earlier this year. Pang Da also paid 45 million euros as pre-payment for its orders of Saab models as part of its efforts to extend the lifeline of the 60-year-old company.

Pang Da said in a statement yesterday that it will prepare to claim its right as one of the debtors and participate in Saab's liquidation while arranging provision for bad debts on its balance sheet.

General Motors Co, which still has preference shares in Saab, had blocked the proposed tie-up on concerns over intellectual property rights.

Though Chinese automakers are eager to lift their technological capabilities through overseas purchases, industry analysts believe domestic auto companies should learn a lesson from Pang Da and be better prepared.

"Chinese companies should particularly be aware of the potential legal risks and sufficient investigation of targeted firms should be done, including both the fundamentals of the companies and their debts," said Yale Zhang, managing director of Automotive Foresight Shanghai Co.

Shares of Pang Da closed at 6.47 yuan yesterday.