Profit per passenger vehicle rises 0.3% in Q1 in China

Shanghai, April 14 (Gasgoo.com) Despite the spike in raw material costs, the first quarter's sales in China's auto market show that the average profit of the country's passenger vehicles (including sedans, SUVs and multi-purpose vehicles) has increased slightly by 0.3% in the first three months of the year, said an industry official yesterday.

The slight profit rise is no match for last year's growth rate of 65% in the auto sales of the country, but it is a comparatively great achievement given the pressure from surging costs of raw materials for car-making. Since the beginning of 2008, the manufacturing cost for each vehicle has increased by about 2,000 yuan ($285.71) due to the appreciation of Chinese currency yuan as well as the spike in the raw material prices and labor force cost. And therefore many people anticipated that the prices of complete vehicles would rise considerably to make profits.

But the 0.3% profit rise for each passenger vehicle didn't come from price increase, said some industry analysts. The hard-earned, though mediocre, profit growth is attributed to several factors: 1. Many carmakers have cut their marketing and promotion cost instead of the vehicle price; 2. The productivity and capacity of auto-making has improved while the labor force has been down-sized; 3. The government-urged innovative strategies and remodeling / revamping efforts have come to pay off now.

Meanwhile, the profits of auto-parts makers have increased to a greater degree in China over the last three months, especially those of joint ventures and multinational companies. In recent years, a growing number of global-brand vehicles for the Chinese market have been locally made in China and thus have boosted the demand for and capacity of auto parts.

Latest statistics show that nearly 1.73 million passenger vehicles were sold in mainland China in the first quarter of 2008, an increase of 15.9% year on year (y/y), including 622,900 units sold in March, up 18.5% y/y. But it is predicted that if the raw material costs continue to surge, the growth of vehicle sales is likely to slow down in April.