Automakers' profits down 7.9%
By Yu Qiao (China Daily)
Updated: 2004-11-29 08:46

China's vehicle manufacturers' profits registered their first year-on-year fall in six years, with the trend set to continue.

The National Bureau of Statistics revealed that vehicle producers' profits dropped 7.9 per cent year-on-year during the first three quarters of 2004.

Profits in the third quarter of this year plunged 33.6 per cent from the same period last year and 44.5 per cent from the second quarter, according to bureau official Jiang Yuan, although he failed to reveal the actual profit figures.

"The profit collapse mainly resulted from sharp declines in automobile prices and output growth," Jiang said.

Almost all domestically-manufactured cars, including premium brands such as Audi and BMW, have cut their prices this year in a bid to lift sales.

Last week, Tianjin FAW Xiali Co Ltd, the compact car maker owned by the giant First Automotive Works Corp, slashed its prices by as much as 20 per cent.

Average prices on the domestic market declined by around 15 per cent year-on-year, said Zhang Xin, an auto analyst at Guotai & Jun'an Securities Co Ltd.

Automobile sales growth decreased sharply this year due to banks' controls on car loans, soaring oil prices and customers' expectations of further price cuts.

Sales of domestically-manufactured vehicles grew 17.6 per cent year-on-year to 4.13 million units during the first 10 months of 2004.

The growth was down from last year's 34 per cent. Passenger car sales growth slumped to 18.8 per cent during the period from last year's 75 per cent. Passenger car output in October dropped 14.2 per cent year-on-year to 143,500 units.

"Automakers' profits were also greatly eroded by the high prices of materials, such as steel," said Zhu Yiping, spokeswoman for the China Association of Automobile Manufacturers.

Domestic steel prices remained bullish this year mainly due to strong demand from the auto and other sectors.

Jiang said automakers' profit shrinkage would be difficult to check in the fourth quarter of this year as vehicles sales would continue to slide.

Zhang from Guotai & Jun'an said shrinking profits, and some losses, would weed out the auto industry's less competitive players, but strengthen those who weather the storm.

"This will spark a new round of change in the industry," he added.

There are almost 130 automobile producers in China, including more than 30 passenger car manufacturers.

China will lift quotas and cut tariffs on auto imports to 30 per cent from 34.2-37.6 per cent at the beginning of next year, according to its commitments to the World Trade Organization.

Close