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Domestic automakers reported sharp profit declines in the first half of the year as vehicle sales slowed. Analysts said manufacturers now will have a hard time meeting this year's sales targets.
FAW Car Co led the downward trend as it predicted a loss of between 45 million yuan ($7.05 million) and 75 million yuan in the first half. Its sales dropped more than 35 percent to 91,700 units.
The Shenzhen-listed company blamed the sales decline on fierce competition in the shrinking market. FAW Car also noted decreasing vehicle prices and growing operating expenses.
Meanwhile, Warren Buffett-backed Chinese battery and car maker BYD Co said in a statement that its net profit from January to June will fall 75 percent to 90 percent from a year ago. Its sales declined 11 percent year-on-year to 206,900 units during the period.
Chang'an Automobile (Group) Co Ltd also reported that it faces a net profit decline of between 44.23 percent to 49.04 percent, because of poor sales of its local-branded vehicles. However, its sales in the Chinese market, including those from joint ventures, dipped only 4.15 percent year-on-year from January to June.
JAC Motors estimated its net profit would reach 313 million yuan, a decline of 37.3 percent over last year, while FAW Haima Automobile Co Ltd predicted its net profit will dive 50 percent to 80 percent to about 40 million yuan to 90 million yuan from a year ago in the first half.
According to the China Association of Automobile Manufacturers, China's domestic vehicle sales growth experienced a 14-year low of only 2.9 percent year-on-year, with 9.6 million vehicles sold in the first half.
The association said that homegrown passenger vehicle brands' market share dropped 3 percentage points in the first half to 41.39 percent, compared with more than 50 percent in 2010, a year that China's automobile market surged 32 percent year-on-year. Total sales in the first six months dipped 0.16 percent from a year ago to 3.15 million units.
The association's statistics also showed that most of the automakers failed to reach their sales target in the first half, excluding Shanghai GM, FAW Volkswagen, Shanghai Volkswagen and Chang'an Ford, the well-established joint ventures of foreign automobile giants.
Chery Automobile Co, China's biggest homegrown automaker by sales, reported a sales decline of 9 percent from the previous year to 265,500 units in the first six months.
FAW Mazda Motor Sales Co Ltd only accomplished 39.6 percent of its 2012 sales target in the first six months, delivering 59,400 vehicles to Chinese consumers, with year-on-year sales growth declined by 10 percent.
"The manufacturers should think over their previous sales target for the whole year, and consider seriously how to adjust their production and sales plan for the second half," said Dong Yang, the association's secretary-general.
Jia Xinguang, an independent auto analyst, agreed with Dong. Automakers which were challenged by poor sales in the first half should face the challenges and change their sales plans, Jia said.
"They should put more efforts to change marketing strategies," Jia said.
However, he asked automakers not to wage a price war, which would adversely affect their brands in the long run.
(China Daily 07/27/2012 page15)