Dongfeng Motor Group, the mainland's third-largest automobile manufacturer, said its sales increased 30 percent in the first quarter of this year thanks to strong market demand for new model vehicles.

The firm, a partner of France's Peugeot Citroen and Japan's Nissan, sold 270,000 vehicles during the period, out of which 70 percent were passenger autos and 30 percent were for commercial use.

"China's automobile industry will maintain its rapid growth in 2008," Chairman Xu Ping said. "Dongfeng's sales of passenger cars grew very fast in recent years and outpace commercial vehicles. We want to keep the 7-to-3 ratio."

In response to the soaring raw material and oil prices, Dongfeng raised the prices for heavy-duty trucks earlier this month.

"The price lift was in an acceptable level to the market," Xu said. Asked if the group will adjust the vehicle prices again, he said that depends on the market.

The Wuhan-based company will see its production costs jump by 2 percent this year due to the soaring cost of raw materials such as steel.

Credit Suisse recently downgraded the outlook in Dongfeng Motor from "neutral" to "underperform".

The bank said in a research note last month that the company's sales-to-date remain robust. But it is still vulnerable to inflation in steel prices and a potentially intense slowdown in the second half of the year due to the increase in raw material prices and the likelihood of a slowdown in overall industry growth.

Strong 2007 results

Dongfeng said its net profits in 2007 rose 81.2 percent from a year earlier thanks to robust sales.

Net profits totaled 3.77 billion yuan last year, up from 2006's 2.1 billion yuan, while revenue increased 23 percent to 59.3 billion yuan after the launch of the new Dongfeng Honda CR-V.

Dongfeng sold a total of 949,500 vehicles in the period, up 26.5 percent from a year earlier.

As a leading home-grown car maker, Dongfeng has formed ventures with Honda Motor, Nissan Motor and Peugeot SA.

The group is studying the feasibility of listing in the A-share market, said Liu Zhangmin, executive director of Dongfeng.

It is also working on developing its own brand models and hopes to introduce them in two years, Liu said.

(HK Edition 04/18/2008 page2)