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June 9, 2003

CHINA: Minivan maker bullish on profit despite SARS hit

China's top minivan maker, Chongqing Changan Auto, said on Monday it is sticking to a forecast of a more than 50% annual rise in first-half profit despite a hit to May sales from the SARS virus, according to Reuters. But the company, which is building a $US98 million car plant with Ford, would not reveal the extent of the hit from the spread of Severe Acute Respiratory Syndrome, the news agency added.

By bcusack

China’s top minivan maker, Chongqing Changan Auto, said on Monday it is sticking to a forecast of a more than 50% annual rise in first-half profit despite a hit to May sales from the SARS virus, according to Reuters.

But the company, which is building a $US98 million car plant with Ford, would not reveal the extent of the hit from the spread of Severe Acute Respiratory Syndrome, the news agency added.

Reuters noted that SARS first appeared in southern China and the country has been the world’s hardest hit. Although analysts had noted a rise in private car sales to people terrified of taking public transport during the outbreak, commercial vehicles might see a hit from the deadly disease, the report added.

Reuters said that first quarter earnings at Ford’s only Chinese partner grew more than fourfold though a spokesman declined to forecast Changan Auto’s second half results, but said a prediction would be included in an interim results report expected in August.

Changan Auto and Ford made their first Fiesta compact in January at their plant in the southwestern city of Chongqing, Reuters noted.

The news agency said that sales by Changan Auto, China’s fourth largest car maker, rose 91.6% year on year to 100,777 units in the first three months, while output climbed 50.5% to 92,673, helped by booming economic growth.

The company, which also has a venture with Suzuki Motor, saw 2002 profit soar 420% year on year to 835 million yuan ($100.9 million), Reuters said, but cautioned that analysts expect 2003 results for listed Chinese vehicle makers will be less than spectacular due to pricing pressures in an increasingly competitive market and a price war.

In April, Changan Auto cut the price of one of its main products by 13%, Reuters noted.

“I think profitability will come down quite far,” Deutsche Securities auto analyst Lawrence Ang told Reuters. “I expect prices to fall 10% this year.”

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