China's top 16 automotive groups reported a 70 percent increase in first-quarter profits helped by brisk sales, but the pace is expected to slow due to pricing wars in the world's second-biggest vehicle market.

Post-tax profits totaled 12.8 billion yuan in the first three months of 2007, up 69.9 percent from a year ago, according to data provided by China Association of Automobile Manufacturers on Friday.

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SAIC Motor Co Ltd, the biggest manufacturer by sales, posted profit growth of 71.9 percent, while profit from First Automotive Works Corp, the No 2, increased one-third.

Zhu Yiping, an official from the auto association, said strong vehicle sales boosted by new model launches helped the profit surge.

From January to April this year, sales of domestic passenger vehicles - sedans, sport utility vehicles, multi-purpose vehicles and micro-buses - climbed 20.7 percent to 2.08 million units, according to the auto association.

Zhu said automakers' growing cost-cutting efforts also helped to raise profits.

However, analysts predicted full-year profit growth will be dampened by aggressive price incentives brought by mounting competition.

Zhang Xin, an analyst with Guotai Jun'an Securities Co Ltd in Beijing , said 2007 profits of the 16 largest automotive groups will grow 35 to 40 percent from last year.

"Producers have to cut prices to tempt buyers, which will hurt their margins in the remaining period of this year," Zhang said.

Nanjing Automobile Corp's joint venture with Italian carmaker Fiat Auto on Tuesday slashed prices of the Perla, Palio and Siena models by 8,000-11,300 yuan.

Hua Xue, chief executive officer of Cheshi.com.cn, a Beijing-based website tracking nationwide car prices, said last month that average prices of China-made cars will tumble 6 percent in 2007.

(China Daily 05/12/2007 page10)

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