Reuters - SAIC Motor Corp, China's biggest auto maker by sales and owner of the MG marque, reported a modest 5 percent rise in first-half earnings in a slowing domestic market, lagging rivals such as Geely and Great Wall Motor, which were boosted by their car exports.
SAIC's sales growth was well below the runaway pace seen in 2010, when it was bolstered by Beijing's stimulus policies, and a far cry from 36 percent growth last year, before China's economy felt the chill from the euro zone debt crisis.
In a stock exchange filing on Wednesday, SAIC blamed a slowing economy and warned about the challenges ahead.
"There are several unfavorable factors and challenges," it said. "There are fairly big inventory pressures in the domestic market, and more cities have started to cap car sales."
January-June net profit rose to 10.78 billion yuan ($1.7 billion) from 10.26 billion yuan a year earlier.
"The market has slowed significantly and every player is affected," Zhang Xin, an analyst with Guotai Junan Securities, said ahead of the earnings.
DONGFENG DECLINES
Second-ranked Dongfeng Motor earlier posted an 8 percent drop in its first-half earnings.
"Dongfeng's car sales held up pretty well, but the slowing economy and weak foreign trade has taken a toll on its heavy truck business," said John Zeng, Asia Pacific director of industry consultancy LMC Automotive.
Dongfeng, which has car ventures with Nissan Motor, Honda Motor and PSA Peugeot Citroen, sold 7.1 percent more passenger vehicles in January-June, but deliveries of heavy-duty trucks slumped 31.6 percent, company data show.
Among China's other homegrown brands, Geely Automobile Holdings, whose parent owns Volvo Car, reported an 8.7 percent increase in first-half profit, while Brilliance China Automotive pushed up profit by 42 percent, helped by solid demand for cars it makes in partnership with BMW. Great Wall Motor, the country's leading sport utility vehicle and pick-up truck maker, had previously posted a 30 percent jump in first-half net profit.
But FAW Car, which makes the Red Flag model, swung to a loss in January-June, and earlier this week Warren Buffett-backed BYD reported six-month profit that plunged 94 percent amid weak sales.
OUTPACE THE MARKET
China's once-sizzling car market has been losing steam since Beijing last year stripped away tax incentives for small cars. Truck sales have also slumped as economic growth has slowed.
SAIC President Chen Hong said in March he expected overall vehicle sales in China to rise 7-8 percent this year, with SAIC outpacing the market. For January-July, SAIC sold 2.55 million vehicles, up 12.3 percent - three times the overall market's growth rate.
SAIC set up a joint venture with Volkswagen in the mid-1980s, and formed a second venture with a major foreign automaker, General Motors, in 1997. SAIC sold over 4 million vehicles in China last year.
As domestic market growth stutters, SAIC and some of its local rivals are looking to make inroads into global markets, especially in emerging economies. SAIC last year resumed production of the MG 6 sedan at the old MG Rover plant at Longbridge in Birmingham in central England, aimed at the European market.
SAIC shares - valued at around $20 billion - closed up 1.5 percent in Shanghai on Wednesday ahead of the results. The stock has fallen around 18 percent this year, while FAW is down around 10 percent and Great Wall has gained 26 percent. The broader Shanghai Composite Index is down 5.7 percent.
