Shanghai Automotive, which owns a fifth of General Motors’ main car plant in China, reported a doubling of fourth-quarter earnings on Friday, but missed expectations as China’s credit curbs hammered demand, Reuters said.
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Analysts reportedly had expected a bigger jump in quarterly income from an extremely low 2003 base.
Shanghai Automotive Co. Ltd., an auto parts maker that is also the sole listed unit of GM’s Chinese partner, posted a net profit of 171.09 million yuan ($US20.7 million) in 2004’s last quarter, versus 71.8 million yuan a year ago, the news agency said.
For 2005, its profits are expected to slide 20% due to decelerating demand, rising steel costs and price discounts at its venture with GM, according to three analysts polled by Reuters on Friday.
The report said the main plant in China’s financial hub, which cranks out mainly Buicks, accounts for over 70% of the company’s earnings – the venture, China’s largest car maker, posted a 26% rise in unit car sales in 2004.
“A big earnings fall for 2005 is almost certain because of weakening domestic industry conditions,” Xu Xiang, a senior analyst at China Southern Securities, told Reuters, adding: “No company can completely escape slowing output and sales, or lower margins after price cuts.”
The news agency noted that growth in car sales in the world’s third-largest market slowed dramatically to just 15% in 2004 after a near-doubling in 2003 as Beijing tightened credit to a handful of industries, including autos, while experts expect the market to grow just 10 to 15% in 2005 as Beijing keeps up the credit curbs, which are aimed at bringing about a soft landing of the world’s seventh-largest economy.
