BEIJING, Aug 22 (Reuters) - Chinese automakers have had
their toughest first half since the global financial crisis and
the rest of this year looks set to be tougher still as the
world's largest auto market sputters in a slowing economy.
State auto groups with strong foreign ties, such as domestic
champion SAIC Motor Corp, can still deliver earnings
growth, but others may find themselves locked in reverse gear,
industry observers say.
"This is a tough year for all automakers, large or small.
2011 wasn't so good either because (government stimulus)
incentives were gone, but it's much worse now as the economy is
not doing so well," said Zhang Xin, an analyst at Guotai Junan
Securities. "It's like a double whammy."
China's economy grew at its slowest pace in more than three
years in the second quarter as demand at home and abroad
slackened, confirming a downtrend that has full-year growth on
course for its weakest in 13 years.
The China Association of Automobile Manufacturers is keeping
to its forecast for a 5-8 percent rise in overall vehicle sales
this year - a far cry from explosive growth of 46 percent and 32
percent in 2009 and 2010 respectively. January-July total
vehicle sales rose just 3.6 percent after anemic growth of 2.5
percent in 2011, setting China up for its slowest back-to-back
years of growth since the late 1990s.
Life for China's local brands is tough.
Geely Automobile Holdings Ltd, which reports
half-year earnings later on Wednesday, and Great Wall Motor Co
Ltd should hold up better than most as they
have expanding export businesses, analysts say.
But Warren Buffett-backed BYD has
warned of a more than 50 percent slump in its January-June
earnings, blaming weak car sales and continuous losses in its
solar energy business. The safety of its electric car was also
called into question after an e6 taxi caught fire in a fatal
accident in May even though a probe showed the lithium-ion
phosphate battery that powers the car did not explode after the
collision.
And FAW Car has predicted it could swing to as
much as a 75 million yuan ($11.8 million) first-half net loss.
SAIC, which makes cars in China in partnership with General
Motors and Volkswagen AG, the two largest
foreign automakers in the market, could still achieve
double-digit earnings growth in the second quarter, according to
forecasts by three analysts - still a far cry from recent growth
spurred by Beijing's stimulus measures. Earnings jumped by
around a quarter last year when the Chinese economy appeared
largely immune from the debt crisis seizing Europe.
Net income at Dongfeng Motor Group Co - which
makes cars in partnership with Nissan Motor, Honda
Motor and PSA Peugeot Citroen - is seen flat
in the first half as it is exposed to a steep downturn in heavy
truck sales.
Geely is the second-best performer in the sector this year
among 53 large- and mid-cap autos firms globally, with its share
price rising 62 percent, Thomson Reuters StarMine data shows.
Chinese automakers crowd the list of losers in the global auto
sector, with shares in BYD, Dongfeng, SAIC and Brilliance China
among the worst performers so far this year.
LUXURY PRICE WAR
Even the popular German luxury brands have resorted to a
price war this year as they look to hit ambitious sales targets
in China - a move that may further cannibalize the sales and
earnings of mass-market marques.
Buyers can drive home a brand new Toyota Corolla for 131,800
yuan, more than a third cheaper than two years ago. A Buick
Excelle, ranked fourth on China's top selling list, can be had
for just 76,900 yuan, after a 23 percent discount, according to
cheshi.com, an industry website that tracks prices at more than
3,000 dealerships across China.
Both Toyota Motor and Nissan saw sales in China
decline last month, and Changan Automobile Co
blamed an estimated 44-49 percent drop in its
first-half earnings on a smaller contribution from its car
venture with Ford Motor and Mazda Motor.
"There are lots of uncertainties ahead," said John Zeng,
Asia Pacific director for industry consultancy LMC Automotive.
"The euro zone could continue to drag on the economy ... and the
auto market could slow further if more cities start to restrict
car sales."
Guangzhou's city government last month joined Shanghai,
Beijing and Guiyang in capping car sales in an effort to ease
chronic traffic congestion and pollution. Xian,
an inland city in the northwest, was forced to back down from a
similar move after a public outcry. Other cities said to have at
least considered restricting car sales include Chengdu, Hangzhou
and Dalian.
