China carmakers have toughest H1 since crisis

By Fang Yan and Don Durfee, Reuters

BEIJING — Chinese automakers have had their toughest first half since the global financial crisis and the rest of this year looks set to be tougher still as the world’s largest auto market sputters in a slowing economy. State auto groups with strong foreign ties, such as domestic champion SAIC Motor Corp., can still deliver earnings growth, but others may find themselves locked in reverse gear, industry observers say. For some, exports, mostly to emerging markets such as Ukraine, Indonesia and Sri Lanka, may offer some relief from weak sales at home. On Wednesday, Geely Automobile Holdings, whose parent owns the Swedish brand Volvo Car, posted an 8.7-percent increase in first-half profit — but, while it sold 9 percent fewer cars in China, its exports trebled to 40,061 vehicles.

Spokesman Victor Yang said Hangzhou-based Geely aims to sell about 90,000 cars outside China this year, and will continue to chase export growth, with a forecast of 300,000 cars sold abroad by 2016. Total sales this year are seen at around 460,000 cars. Geely’s chairman and founder Li Shufu told Reuters earlier this year that he wants to sell as many cars overseas as he does in China. “This is a tough year for all automakers, large or small. 2011 wasn’t so good either because (government stimulus) incentives were gone, but it’s much worse now as the economy is not doing so well,” said Zhang Xin, an analyst at Guotai Junan Securities. “It’s like a double whammy.” China’s economy grew at its slowest pace in more than three years in April-June as demand at home and abroad slackened, confirming a downtrend that has full-year growth on course for its weakest in 13 years.

The China Association of Automobile Manufacturers is keeping to its forecast for a 5 to 8-percent rise in overall vehicle sales this year — a far cry from explosive growth of 46 percent and 32 percent in 2009 and 2010 respectively. January-July total vehicle sales rose just 3.6 percent after anemic growth of 2.5 percent in 2011, setting China up for its slowest back-to-back years of growth since the late 1990s.