China automakers growing into value-creating enterprises

Shanghai, May 6 (Gasgoo.com) Data released by listed auto companies regarding their car sales in Q1 show that Chinese automakers are growing from fledgling companies into value-creating enterprises, with SAIC and FAW Car as the bellwethers.

Domestic auto companies, such as SAIC, basically have stepped into a transitional period. The FAW Car is growing fast because of the previous low figures. The entire auto industry is at a slow-growth stage as the auto industry is transforming from a growing sector into a profit-making sector, said Zhangxin, an expert of the auto industry in Guotai Junan Securities.

The Q1 report by FAW Car presents an output of 4.95 billion yuan ($707million), up 71.09% year on year (y/y). The earning of per share reaches 0.192 yuan, up 261% with a net income rate at 6.3 % (at 2.98% last year). Wang Liusheng, senior auto analyst from China Merchants Securities, said economies of scale generated by the increasing capacity utilization rate is the main reason for the fast growing enterprise profit.

Sales of SAIC in Q1 amount to 28.929 billion yuan, up 13.56% y/y, and the net income grows by 6.97% y/y to 1.241 billion yuan with each share earning 0.19 yuan.

Simultaneously, some transitional enterprises are going through hard time. Results from Q1 indicate that own-brand enterprises tend to face relatively tougher situation such as Haima Investment Group, FAW- Xiali Automobile and Changan Auto. The rising price of raw materials has brought ever bigger pressure to auto-parts companies. Once petrol price jumps in the future, the auto industry will be greatly influenced.