SAIC Q3 profit falls 78% as GM venture loses share

SAIC Motor Corp., China's biggest automaker, said third-quarter profit fell 78 percent as its venture with General Motors Corp. lost market share and the country's industrywide sales growth slowed.

Net income fell to 260.8 million yuan ($38 million), or 0.04 yuan a share, from 1.17 billion yuan, or 0.178 yuan, a year earlier, the Shanghai-based company said in a statement to the city's stock exchange today. Sales fell 6 percent to 24.3 billion yuan.

SAIC's vehicle sales growth slowed to 9 percent in the first nine months, from 24 percent a year earlier, as customers shunned its aging Buick Excelles in favor of Toyota Motor Corp. Corollas. The country's overall auto sales also dropped for the first time in three years in August and September because of the Beijing Olympics, a slower economy and a plunging stock market.

"Demand for cars is falling and that hits companies like SAIC,'' said Qin Xuwen, an analyst at Orient Securities Co. in Shanghai. "Still, next year may be better, as their GM venture should turn around with the addition of new models.''

GM was surpassed as the second-biggest overseas carmaker in China in the first nine months by Toyota. Volkswagen AG, ranked first, also has a venture with SAIC.

Smaller margins

Chinese carmakers face smaller margins as they slash prices to win customers, while paying more for raw materials. The country's prices for cold-rolled coil steel, used in cars and appliances, averaged 6,822 yuan a ton in the third quarter, or 38 percent higher than a year earlier, according to Beijing Antaike Information Development Co.

Automakers are offering discounts because of slower demand and rising competition. Car sales rose 11 percent in the first nine months, compared with a 22 percent increase for the whole of last year. Average car prices may fall as much as 3 percent this year, Cheng Xiaodong, head of the vehicle-price monitoring arm of the National Development and Reform Commission, said earlier this month.

SAIC has plunged 81 percent this year in Shanghai trading, compared with a 69 percent plunge for the benchmark CSI300 Index. The stock dropped 2.7 percent to 5.02 yuan today before the earnings announcement.