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Brakes on auto giant profits

SAIC Motor Group Corp reported a 86 percent decline in net profit for last year as a result of slowing vehicle sales and its South Korean unit Ssangyong Motor Corp going into court receivership.

Net income dropped to 656 million yuan (US$96 million) or 0.1 yuan per share last year, compared to 4.6 billion yuan and 0.7 yuan per share in 2007, the nation's biggest car maker said in a statement today.

Sales revenue gained 1.44 percent to 106 billion yuan during the same period from a year earlier.
The global financial crisis and cooling vehicle market in China intensified the market competition and led to lower profitability last year, SAIC said in the statement. China's vehicle sales rose at the slowest pace in a decade at 6.7 percent last year.

SAIC, the Chinese partner of General Motors Corp and Volkswagen sold 1.82 million vehicles last year, an increase of 8 percent on a year earlier. The growth for 2007 was 25 percent.

SAIC's South Korea sport utility vehicle subsidiary Ssangyong Motor filed for bankruptcy protection in February after sales slumped 31 percent in 2008. SAIC paid US$500 million for a 49 percent stake in SSangyong as the nation's first overseas acquisition in the auto industry. At the end of November, a total of 51 percent of the holdings owned by SAIC were valued at US$270.7 million.

In a separate statement, the car maker said profit was down 49 percent for the first quarter to 627 million after it took over its smaller rival Nanjing Auto. Sales fell 5.8 percent to 27.2 billion.

SAIC estimated China's overall sales for this year would remain the same as 2008 at around 9.35 million because of the economic downturn and weak consumption.

But government stimulus measures as well as increasing demand in second and third tier cities will create market opportunities.

The car maker aims to sell 1.8 million vehicles and attract sales revenue of 119.4 billion yuan with works focusing on new market expansion and the development of home-developed vehicles and new energy vehicles.

SAIC plans to launch a hybrid version of its home-developed Roewe 750 sedan at the end of 2010, using hybrid technologies from Delphi. The model is expected to save fuel consumption by 20 percent.

It also spent 2 billion yuan setting up a new company to develop new energy vehicles including hybrid and electric vehicles, as well as core spare parts.

Over the next few years, it will spend 15.3 billion yuan on home-developed vehicles, engineering capability and mergers and acquisitions.


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