07-02-2007 Boosted
by buoyant sales, China's auto sector reported a surprisingly sharp rebound in
profits for 2006, according to industry reports, but the pace is predicted to
slow this year.
Combined profits for the industry, including vehicles,
engines, spare parts and motorcycles, jumped by 46 percent to 76.8 billion yuan
last year, according to statistics from the China Association of Automobile Manufacturers.
The robust growth beat the estimates of most analysts, who predicted
the sector's 2006 profits would rise about 20 percent.
Strong overall
performance last year came after two consecutive years of profit decreases due
to slowing sales, rising costs and heated price wars in the domestic car market.
Profits of the sector fell by 24.3 percent in 2005 and 5.2 percent in
2004.
Vehicle manufacturing, the top profit center for the entire auto
sector, earned 34.2 billion yuan last year, a surge of 47.7 percent, according
to the year- end report.
Song Bingshen, an analyst with CITIC China Securities
Co, attributed the hefty profits last year to stronger-than-expected vehicle sales
and record introduction of new models.
Sales of China-made vehicles climbed
25 percent to 7.22 million units last year, which enabled the country to surpass
Japan as the world's second-largest vehicle market. The increase was up from 13.5
percent in 2005. "Car
price cuts failed to squeeze profits last year as most reductions were on older
models," Song said. "Carmakers l aunched many new products which contributed
significantly to their sales," Song said.
However, analysts anticipate
the sector's profit growth this year will decelerate as a result of slower vehicle
sales and bigger price reductions.
Song said the industry is expected
to register profit growth of 15 percent this year, while vehicle sales are expected
to rise by 20 percent.
Hua Xue, president of cheshi.com.cn, a Beijing-based
website for online car sales and price tracking nationwide, said prices will fall
by more than 6 percent this year.
"Many carmakers have set lofty
sales goals this year inspired by strong performance last year," Hua said.
"But the market will not grow as fast as they expect."
"They
will have to cut prices, especially in the low and medium segment, to achieve
their targets," he said.
|
