Automotive industry's profits take a tumble

China's auto industry's profits have been on a downward trend this year, plagued by a slowing market and plunging car prices.

The sector's profits dropped by 5.4 percent in the first quarter from a year earlier, according to data from the National Bureau of Statistics.

This is the first quarterly profit decrease in three years, says Chen Xi, a senior analyst from the bureau's China Economic Monitoring and Analysis Center.

The industry's sales profit ratio slumped 0.6 percentage points to 7.9 percent in the first quarter of this year, from the last quarter of 2014.

Almost one-fifth of automakers and spare parts producers in China were in the red, a 7 percentage point increase, according to the data.

"The hardship could be attributed largely to the market deceleration, car price cuts and growing marketing costs," Chen says.

A slew of carmakers cut prices this year in an attempt to boost sales amid the slowing market.

China's top automotive group SAIC Motor slashed prices of its MG and Roewe models by 10,000 yuan ($1,600; 1,500 euros) to 20,000 yuan.

Shanghai Volkswagen - SAIC's joint venture with Volkswagen - cut the prices of its Touran, Polo, Tiguan, Passat and Lamando models by as much as 10,000 yuan on April 5. The Lamando compact sedan hit the market just three months ago.

On April 11, Sino-US joint venture Chang'an Ford offered price concessions of 7,000 yuan to 11,000 yuan by paying the car purchase tax for buyers.

Hyundai Motor's joint venture with Beijing Motor also started providing customers interest-free loans for two to three years earlier this month.

Analysts predict more carmakers will have to join the price war to boost sales later this year to survive.

Shi Jianhua, deputy secretary-general of the auto association, says the overall market downturn would push the auto industry to further polarize.

"Carmakers that have competitive products will continue to have decent profits, but those without competitive products will have meager profits and even losses," Shi says.

According to the statistics bureau, fixed-asset investment in the auto industry has also slowed due to the market downturn.

Fixed-asset investment in the first quarter grew by 5.1 percent year-on-year. The pace is down 18.2 percentage points from a year ago.

Growth of employment in the auto industry also slowed to 3.9 percent in the same period.