Analysis: Comparison of Great Wall's net profits and costs since 2003

Gasgoo.com (Shanghai) - Return statistics gathered by Gasgoo.com (Chinese) show that Great Wall Motor's net profit experienced negative growth twice since 2003, 23.0 percent in 2004 and 45.3 percent later in 2008. With its profit over doubling to 1.02 billion yuan in 2009, the brand's profits have soared since. Profit again doubled in 2010 to 2.69 billion yuan. This year it looks to exceed three billion yuan, with profits for the first two quarters reaching 1.81 billion yuan. The following is a short comparison of their returns and costs.

Growth in the manufacturer's overall business returns were similar to that of profits, with drop occurring in 2004 and 2008. In 2004, Great Wall's returns decreased 13.7 percent to near 3.19 billion yuan. The decrease was attributed to a change in the country's macroeconomic policies, tightening in automobile loans, changes in traffic restrictions, more competitive market, increase in oil prices and other factors. Great Wall sold 47,400 vehicles that year, a decrease of 9.8 percent from 2003. Meanwhile, influence from the world banking crisis was seen as the key factor behind the 8.3 percent decrease in returns in 2008, which saw the company's net profit fall 45.3 percent to 513 million yuan.

From 2009 to the first half of this year, Great Wall's returns have been growing rapidly, reaching 12.39 billion yuan and 22.18 billion yuan in 2009 and 2010, respectively. Returns in the first half of this year, 13.67 billion yuan, have already exceeded that for the whole year of 2009. Sales were 209,900, 363,500 and 218,300 vehicles for 2009, 2010 and the first half of 2011, respectively.

Looking at the statistics, Great Wall's greatest costs are sales related, with the ratio of sales costs to overall returns having grown from 67.6 percent in 2003 to 82.7 percent in 2009. Sales costs had already broken the 80 percent barrier as early as 2008. That ratio decreased to 78.1 percent (17.31b yuan) in 2010, and again to 76.8 percent in the first half of this year.

Distribution costs are the second largest fee for the manufacturer, having grown from 1.7 billion yuan in 2004 and 2.19 billion yuan the following year to 7.05 billion yuan and 10.7 billion yuan in 2009 and 2010, respectively. Costs have increased another 12.2 percent to 5.25 billion yuan from the first half of 2010 to the first half of this year.

Outside of taxes, administrative costs are the third largest liability for the manufacturer, reaching 296 million yuan in 2009. Those costs grew faster than any other category, growing 66.7 percent to the 291 million yuan this year.