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Precipitous decline in sales worries analysts
By Jin Jing |
May 20, 2011, Friday
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Print Edition
Print Edition
Although a slowdown in China's auto market had been expected following a two-year boom, some industry analysts are voicing concerns the downturn may be too rapid and deep, threatening profits this year.
Last month, 1.55 million vehicles were sold, down a quarter percent from April 2010, the China Association of Automobile Manufacturers said.
It was the first year-on-year decline in 27 months.
For the first four months of this year, vehicles sales rose 6 percent from a year earlier to 6.53 million units. That was 2.12 percentage points lower than in the first three months and also a sharp decline from the 60.5 percent sales surge a year earlier.
General Motors, Toyota, Honda and other auto makers are bracing for a slowdown after China ended subsidies on the purchase of fuel-efficient, smaller autos and on rural vehicle trade-ins this year.
Dong Yang, vice chairman of the manufacturers' association, said 2011 sales growth is likely to fall short of an earlier 10 percent estimate and may even underperform the Chinese economy, which is targeted to expand 8 percent this year.
"It's good to see China's auto sales growth becoming more rational, but the only concern is that the drop-off may be too steep," Dong said at his association's annual meeting.
"A certain number of car makers will see a significant drop in earnings this year, and some could even face financial difficulties," he added.
For the first quarter, seven of the 18 largest car manufacturers in China reported declines in net profit.
SAIC Motor Corp., the nation's largest auto group and the Chinese partner of Volkswagen AG and GM, said profit in the January-March period rose 56 percent from a year earlier to 4.5 billion yuan (US$691 million). That was a far cry from the 359 percent earnings surge recorded for the first quarter of 2010.
"Slower revenue growth and net interest increases will result in a decline in car makers' gross profit margins, triggering higher inventories and sharp reductions in cash flow," said Wang Qingtao, an analyst from Guohai Securities.
Still, Citic Securities said in a note that industry leaders will enjoy sales and profit growth exceeding the industrial average.
According to the car manufacturers' association, revenue of 17 major car makers totaled 580 billion yuan for the first quarter, an increase of 15 percent from a year earlier. That was 2.28 percentage points below the combined gain for January and February.
Aggregate profit for the 17 car makers in the first three months grew 8.7 percent to 53 billion yuan, 7.83 percentage points down from the January-February pace.
Last month, 1.55 million vehicles were sold, down a quarter percent from April 2010, the China Association of Automobile Manufacturers said.
It was the first year-on-year decline in 27 months.
For the first four months of this year, vehicles sales rose 6 percent from a year earlier to 6.53 million units. That was 2.12 percentage points lower than in the first three months and also a sharp decline from the 60.5 percent sales surge a year earlier.
General Motors, Toyota, Honda and other auto makers are bracing for a slowdown after China ended subsidies on the purchase of fuel-efficient, smaller autos and on rural vehicle trade-ins this year.
Dong Yang, vice chairman of the manufacturers' association, said 2011 sales growth is likely to fall short of an earlier 10 percent estimate and may even underperform the Chinese economy, which is targeted to expand 8 percent this year.
"It's good to see China's auto sales growth becoming more rational, but the only concern is that the drop-off may be too steep," Dong said at his association's annual meeting.
"A certain number of car makers will see a significant drop in earnings this year, and some could even face financial difficulties," he added.
For the first quarter, seven of the 18 largest car manufacturers in China reported declines in net profit.
SAIC Motor Corp., the nation's largest auto group and the Chinese partner of Volkswagen AG and GM, said profit in the January-March period rose 56 percent from a year earlier to 4.5 billion yuan (US$691 million). That was a far cry from the 359 percent earnings surge recorded for the first quarter of 2010.
"Slower revenue growth and net interest increases will result in a decline in car makers' gross profit margins, triggering higher inventories and sharp reductions in cash flow," said Wang Qingtao, an analyst from Guohai Securities.
Still, Citic Securities said in a note that industry leaders will enjoy sales and profit growth exceeding the industrial average.
According to the car manufacturers' association, revenue of 17 major car makers totaled 580 billion yuan for the first quarter, an increase of 15 percent from a year earlier. That was 2.28 percentage points below the combined gain for January and February.
Aggregate profit for the 17 car makers in the first three months grew 8.7 percent to 53 billion yuan, 7.83 percentage points down from the January-February pace.
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