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China's biggest automaker warns on profit
(Agencies)
Updated: 2005-06-16 00:41
SHANGHAI, China - FAW Car Co., China's biggest automaker, warned Wednesday
that its first-half net profit could fall by more than 50 percent amid sluggish
sales, rising costs and government moves to tighten credit for buying cars.
FAW Car, whose shares are traded in the southern city of Shenzhen,
posted a net profit of 322.5 million yuan ($39 million) in the first half of
2004, the company said in a notice.
Apart from its own Red Flag sedans, the carmaker, which is based in the
northeastern city of Changchun, produces Mazda 6 models under a technical
license from Mazda Motor Corp.
FAW Car's biggest shareholder, the state-owned
First Automobile Works Group, became the first automaker in China to surpass one
million unit sales in 2004, state media reported earlier this year.
Overall, car sales in China plunged in the second half of 2004 after the
government restricted credit for auto purchases as it tries to slow spending and
investment in areas that it believes are overheated, such as steel, cement and
autos. Sales fell a further 7.7 percent in the first quarter of this year.
The auto sector overall saw profits slide 57 percent in the first four months
of this year, compared with a year earlier, according to the China Association
of Automobile Manufacturers.
Falling car prices and rising costs for steel and rubber have cut into
profits, but slowing growth in sales and a shift away from higher-margin luxury
and full-size vehicles and toward economy models has also hurt.
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