Xu Ping, chairman of Dongfeng Motor Group Co, attends a news conference to announce the company's annual results in Hong Kong Friday. Jerome Favre / Bloomberg

But firm adds it will continue to monitor situation and impact on Nissan, Honda

Dongfeng Motor Group Company, the listed unit of State-owned Dongfeng Motor Corp, said Friday that its joint ventures with Japanese carmakers Nissan and Honda have seen no immediate impact on production from the March 11 earthquake.

"March and April production are not affected. We are closely monitoring the situation and evaluating the possible long-term impacts. Actually some plants in Japan have recovered from the shock. Even in the worst-case scenario, the impact on us would be minor," Xu Ping, Dongfeng's chairman, told a press conference on Friday, adding that the carmaker's 2011 sales target of 2.16 million units, 11 percent higher than 2010, remains intact despite the earthquake.

Michael Robinet, director of global production forecasting for HIS Automotive, said in a March 28 interview that "most vehicle manufacturers will have anywhere between four to six weeks of inventory either on hand or in shipment. Probably, around the middle of April, we're really going to feel the effects of suppliers not getting key components, and also the vehicle manufacturers beginning to run dry on key components."

According to Xu, roughly 85 percent of components at Dongfeng are locally produced.

"Dongfeng is always looking for assets that can be consolidated at a global level, and we are in talks with some foreign parts producers," Xu said.

The Wuhan-based automaker reported a 76 percent rise in 2010 full-year profit to 10.98 billion yuan. Revenue rose 33 percent to 122.4 billion during the same period on robust demand for its passenger cars and commercial trucks.

Dongfeng sold a total of 1.94 million cars last year, up 36 percent from 2009's 1.43 million units.

China became the world's biggest car market in 2009. Overall car sales in 2010 rose to 18.06 million units in 2010, up 32.4 percent year-on-year. According to the China Association of Automobile Manufacturers, car sales in the country will continue growth momentum at a slower pace of 10-15 percent, hitting 20 million units by the end of 2011.

Dongfeng expects to ride on this surging demand in the current five-year national economic blueprint, eyeing a sales target of 4 million units in 2015.

"Although some cities imposed purchase limits, we believe demand will remain high, especially in second and third-tier cities, where the penetration rate is still at a very low level," said Xu.

Dongfeng expects to launch 14 new models in the next two years after delivering five new models and two renewed models last year.

For this year's 2.16 million units sales target, passenger cars will rise 16.4 percent to 1.65 million units and commercial trucks will decline 4 percent to 510,300 units.

"Sales of commercial trucks was extremely robust last year, up 41.9 percent by volume. We think we need to be prudent this year," said Xu.

The company's capital expenditure plan for 2011 is 14 billion yuan and 16 billion yuan for 2012. The majority of the spending will help lift production capacity, upgrade technology and launch new models, according to the company. Out of its 14 billion capital budget, Dongfeng will allocate 500 million to 1 billion yuan on new energy vehicles, which is expected to account for 15 percent of the industry total under national policy guidance.

China Daily

(HK Edition 04/02/2011 page3)