Geely first-half net beats forecast

China's Geely Automobile Holdings (0175.HK), whose parent bought Ford's (F.N) Volvo unit this month, warned of tougher competition and slower sales after its record first-half earnings beat forecasts on Wednesday.

China overtook the United States last year to become the world's biggest car market, as Beijing rolled out incentives to boost spending during the global downturn.

But that growth is expected to wane in the second half as the government presses the brakes to keep the economy from overheating.

"The headline is positive but investors will continue to focus on what is going to happen in the next 12 months," said Steve Man, an analyst at Samsung Securities. "We believe that earnings growth will moderate during that period because of lower sales and lower utilization."

Competition is rising in China as some auto makers cut prices to boost sales, which have been slowing from last year's breakneck pace.

Founded by Chairman Li Shufu, dubbed the Henry Ford of China, Geely said it will launch new and higher end car models this year and focus on building its export business to making it less vulnerable to China's volatile domestic market.

But exports won't provide boost the car maker's revenue just yet. Exports should make up 3.5 percent of Geely's total sales this year, down from about 6 percent in 2009 and would not be a major contributor during the period, Executive Director Lawrence Ang told reporters in Hong Kong.

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