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Profits plummet for many as 'knockout round' looms

By Han Tianyang  (China Daily)

13:39, April 08, 2013

Many domestic carmakers are reporting that profits tumbled last year due to a slowing economy and intense competition in the world's most crowded market.

Dongfeng Motor Group Co recently said that its net profit fell 13.3 percent from 2011 to about 9.1 billion yuan last year as revenues dipped 5.6 percent to 124 billion yuan.

The Hubei-based carmaker said it sold more than 2.1 million vehicles last year, a decrease of just under 1 percent from 2011. Its passenger vehicle sales did grow by 5.7 percent to 1.7 million units, but its commercial vehicle deliveries fell 21.2 percent to about 415,000 units.

Dongfeng attributed its performance to a shrinking commercial vehicle market in the wake of a sluggish economy. It also said the consumer boycott of Japanese brands following a territorial dispute that began in September affected business at its joint ventures with Nissan and Honda.

Guangzhou Automobile Group Co reported a 73.5 percent plummet in net profit to 1.13 billion yuan last year, though its revenue grew 18 percent to 12.96 billion yuan.

The company explained that the contraction was the result of factors including the increasing market competition, restrictions on new car sales in some big cities, new facilities that have yet to bring returns, as well the territorial dispute that affected its joint ventures with Toyota and Honda.

The carmaker added that the revenue increase last year was partly due to strong sales of the new SUV by its wholly owned brand Trumpchi.

FAW Car Co, the listed arm of FAW Group, has yet to release a financial report for last year, but the company estimates it had a loss of 500 to 800 million yuan as a result of falling sales and intensive strategic investments. The company said that it sold only 180,000 cars last year as increasing market competition squeezed the performance of its wholly owned brand and joint venture products with Mazda.

Other domestic automakers that also recorded a profit slump last year include Jianghuai Automobile Co, Jiangling Motor Co, Jinbei, Haima, Lifan and Sinotruk.

SAIC Motor Corp retained its crown as the largest and most profitable carmaker last year, with sales of nearly 4.5 million vehicles and net profit of about 20.8 billion yuan. Yet even its net profit edged up just 2.62 percent from 2011, the slowest growth for the carmaker in the past four years.

Bucking the trend, State-owned Chang'an Automobile Group and private sector carmakers Great Wall Motors and Geely Automobile all had double-digit profit growth last year.

Analysts said that the widely varied performance among domestic carmakers shows that the country's auto industry has now entered the "knockout round" as the good old days of everyone growing are gone.

Last year, the secretary-general of China Association of Automobile Manufacturers Dong Yang predicted that in the next three to five years, half of the domestic brands could become extinct.

Chen Xinnian, a researcher with the Nation Development and Reform Commission, recently said that auto sales this year are expected to maintain similar growth to last year or even a little slower.

The nation's vehicle sales totaled 19.3 million units last year, up 4.3 percent from 2011, according to CAAM statistics. Passenger vehicle sales for the year reached about 15.5 million units, a 7.1 percent increase.

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