FAW Car reports net deficit in first three quarters, declining Mazda sales believed to be a major factor

Gasgoo.com (Shanghai October 23) - FAW Car has announced a net deficit of 255 million yuan to 350 million yuan ($40.34m-$55.39m) for the first three quarters of the year, 21st Century Economic News reported today. This year's three quarter figure represents a drop of nearly 100 million yuan in profits for the manufacturer. The manufacturer announced a net deficit of 190 million yuan to 280 million yuan ($30.07m-$44.31m) in the third quarter of the year alone.

FAW Car was able to reduce its deficit to 61.42 million yuan ($9.71m) over the first half of this year. However, its performance in the third quarter changed all that, with its total deficits from those three months near four times the amounts from the first six months combined. China Merchants Securities Analyst Wang Liusheng fears that it may be difficult for FAW Car to return to making profits anytime soon.

A key factor behind FAW Car's poor performance is the declining sales of its traditional moneymaker Mazda. Sales of the Japanese manufacturer's vehicles in China have declined six percent over the first nine months of the year. Among them, sales of FAW Mazda vehicles fell 13 percent. Mazda sales started declining well before recent Chinese demonstrations begun encouraging boycotts of Japanese vehicles. "It is very hard to determine whether or not the sales drop last month was related to recent boycott activities," Naoto Oikawa, spokesperson for Mazda's Shanghai headquarters, said.

The Mazda6 has been FAW Car's key earner for the past few years, accounting for around half all the vehicles the company sold in 2011 and responsible for over 60 percent of its earnings. UBS Securities Analyst Zhou Tianlong estimates that 70 to 80 percent of FAW Car's income comes from the model. With the Mazda6's sales beginning slow down this year despite continuous price cuts, it is evident that FAW Car must begin diversifying its product line.