BMW’s Chinese partner slid into the red in the first half of 2005 as sales and prices fell and as it took a big asset impairment charge, according to Reuters.

However, Brilliance China Automotive Holdings said the second half should be better as it rolls out new models, including a new BMW 3 series, the news agency noted.

Brilliance reportedly said it made a net loss of 299 million yuan ($US37 million) compared with a profit of 407.62 million yuan in the first six months of 2004. The result was worse than the 70 million yuan net loss forecast by UBS.

According to Reuters, Brilliance China , China’s largest minibus maker, said it made an asset impairment provision of 180 million yuan in its operations making the “Zhonghua” model sedan.

“Competition in China’s auto market is fierce and the overall profit margin came down to international levels of 3-5% currently from about 30% last year,” chief executive Lin Xiaogang reportedly told a telephone conference.

The report said the company also recorded a loss of 56.5 million yuan from its BMW joint venture due to a 10% price cut on the old 3 series model and higher marketing expenses to sell-off inventory before the launch of the new 3 series, he said.

The joint venture sold 46% more BMWs during the reported period to 7,253 cars, Reuters noted.

But the report added that sales in its core minivan and Zhonghua sedan operations remained weak following a brutal 2004 of slowing growth in China’s car market, the world’s third-largest.

Reuters said The company sold about 29,000 minibuses and 4,598 Zhonghua sedans from January to June, down 6.2% and 40%, respectively, from the year-earlier period but is optimistic about its second half prospects, with the recent launch of the new 3-series BMWs and the upcoming rollout of new Zhonghua models.

“We are confident that the second half will have a great improvement in sales and profits,” Lin reportedly said.

The company aims to sell 63,200 minibuses and 15,000 Zhonghua sedans this year against sales of 61,600 minibuses and 10,982 Zhonghua cars last year.

According to Reuters, Lin said the company expected big orders from local governments for Zhonghua cars, which should help sales.