Sunday, July 3, 2005

Chinese car makers warn on profits

by Brian Turner

Both Chongqing Changan Auto and Shanghai Automotive Company, two of China’s biggest automobile manufacturers, have issued profit warnings for the first half of the year.

Figures could show that profits have fallen by more than 50 percent for both companies when they announce first-quarter results in August.

Chinese law requires companies to issue warnings when they believe their profits will fall more than 50 percent in a reporting period.

Shanghai Automobile Company, the listed subsidiary of Shanghai Automobile Industry Corporation, is China’s biggest carmaker and is involved in joint ventures with both General Motors and Volkswagen, while Changan has a joint venture with Ford.

After intense growth in 2002 and 2003, demand for vehicles began to slow in the second half of 2004 as the Chinese government attempted to slow economic growth by means such as limiting credit.

Combined with added manufacturing capacity which led to price cuts, this slump in demand has led to lower profits. Demand has growth by only 4 percent so far in 2005.

 

 

 

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