Chinese auto makers continue to report strong results in the second half of the year


Analysts pointed out that Chinese auto makers have strong sales and earnings in the first half of the year and it is expected that this momentum will continue in the second half of the year.
In the first half of the year, there have been some modest price-cutting activities in the Chinese auto market, which did not repeat the fierce price war in 2004. It is expected that even if there is a price war in the second half of the year, it will perform relatively mildly, which means that the profitability of automobile manufacturers during the period will not deteriorate significantly due to price cuts.

According to Reuters, Su Guojian, head of the China Research Department at Macquarie Securities, pointed out that the profitability of most automakers in the Mainland this year has generally increased compared with the same period of last year, and the profit margin has remained stable or has improved. Strong sales growth led to an increase in auto makers' first-half revenue and earnings.

He expects the overall price cuts of the Chinese auto industry this year to be only 3% to 5%, and the fierce price war in 2004 will not repeat itself.

Other analysts also basically agreed with Su Guojian’s optimistic judgment on the price, sales volume and profitability of the car.

Kong Lei, a joint director of Fitch's Asia Pacific Corporate Rating Department, said that the price pressures faced by auto makers have eased somewhat, and they are therefore able to achieve relatively stable profit margins and thus increase profitability.

CSM Asia Automotive analyst Zhang Yu pointed out that in the first half of the year, the sales of passenger cars in China increased by more than 40%, which is a fairly strong growth figure. In the past two years, the price of cars in the Mainland has fallen rapidly, while at the same time the income of residents has risen. It is believed that relatively stable prices in the second half will stimulate a considerable degree of demand growth.

Analysts also noted that domestic brands such as Geely, Chery, and Brilliance are using their price advantage to start eroding the original market share of joint venture car manufacturers.

Zhang Yu is optimistic about the business prospects of these small car manufacturers. He said that the low-cost competition strategy adopted by most domestic manufacturers has worked well, and its profitability has performed quite well, with Chery and Brilliance being the most prominent.

In the first July, Chery Automobile sold 159,564 vehicles, an increase of 62.0% year-on-year. During the same period, Geely Automobile sales were 117,841 units, an increase of 55.0% year-on-year; and sales of Huachen Motor in the first half of the year were 92,200 units, an increase of 57.7% year-on-year.

However, analysts also pointed out that although the Chinese auto industry achieved satisfactory results in the first half of the year, if crude oil prices continue to rise, the risks they face are self-evident. This is because rising crude oil prices will drive up gasoline prices, which will not only increase production costs, but will also curb car demand.

Kong Lei of Fitch Asia Pacific anticipates that the consideration of gasoline costs will affect the sales of automobiles in the second half of the year, especially the sales of large-displacement cars. However, the government's policy of encouraging the sale of small-displacement cars will help the sales of the latter type of car.

Although international oil prices continue to remain high, the price of gasoline in mainland China has not been significantly raised so far. In March, the National Development and Reform Commission of China raised the ex-factory price of gasoline by 300 yuan per ton and diesel by 200 yuan. In May, the retail prices of gasoline, diesel and naphtha were raised by 500 yuan per ton. However, no adjustments have been made to the oil price since this year.

On the other hand, analysts expect that the prices of raw materials for automobile production, especially steel, will not rise significantly in the second half of the year.

Kong Lei pointed out that the increase in the price of raw materials in the first half of the year was not as large as originally expected, especially in the steel industry. The price of the main varieties of steel has actually declined slightly during the period, which helps the mainland automakers to control costs.

He predicts that as long as there is no fierce price war, mainland car demand may increase by the top 10% to 15% in the second half of the year, resulting in sales of 4 million vehicles during the period.

According to the data provided by the China Association of Automobile Manufacturers, in the first seven months, Chinese auto manufacturers sold a total of about 4 million vehicles, an annual increase of 24.29%; over the same period, vehicle production increased by 26.77% to 4.13 million vehicles. In August, car sales increased by 26.06% year-on-year to 528,100 units, of which passenger vehicle sales were 376,800, an increase of 29.21%; commercial vehicle sales were 150,100, an annual increase of 18.78%; before August, sales of passenger cars were 2.37 million units. , an increase of 41% year-on-year.

In the first half of the year, the total net profit of the Chinese auto industry was 36.77 billion yuan, an increase of 59.58% year-on-year. In the previous July, Volkswagen’s China affiliate market share was 16%, ranking first; GM China’s affiliated market share was followed by 11%.

According to the sales ranking in the first half of the year, Shanghai GM, Shanghai Volkswagen and FAW-Volkswagen separated the top 3, with sales of 183,900, 161,900 and 147,600 respectively; followed by Chery Automobile, Beijing Hyundai, FAW Toyota, FAW Xiali, Geely Automobile, Guangzhou Honda and the Dongfeng symbol Citroen, each of its first half sales exceeded 100,000 units.

In accordance with the ranking of performance growth in the first half of the year, Dongfeng Motor and FAW Xiali performed the most eye-catching performance. The strong sales and cost reductions have made the above company's profitable progress.

Among them, Dongfeng Motor made a profit of 1.11 billion yuan in the first half of the year, an increase of 69% year-on-year; during the same period, the profit of FAW Xiali increased threefold year-on-year; Changan Automobile increased 48.2%.

In addition, US General Motors and its Shanghai subsidiary sold a total of 453,832 vehicles in the first half of the year, an increase of 47% year-on-year, of which Shanghai Automotive sales in the first half of the year increased 49.1% year-on-year to 201,901 units.






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