Taiwan’s largest car producer, China Motor Corporation, said on Wednesday pre-tax profits at its mainland venture, South East (Fujian) Motor, would be down 10% to 25% from an earlier forecast due to rising competition, Reuters reported.
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Reuters quoted China Motor’s vice president Hsu Li-min as saying the 50-50 venture with Fujian’s provincial government, or Soueast, is expected to post a pretax profit of 900 million yuan ($US109 million), down from a previous forecast of 1.0-1.2 billion yuan.
“The mainland market has encountered price cutting recently, and Soueast has no way but to follow suit, resulting in eroding profit margins,” Hsu told Reuters by telephone.
While China remains the world’s fastest growing car market — the revised 2003 pre-tax was still much higher than the 382 million yuan last year — that growth has attracted more competition, Reuters noted.
The news agency said the previous upbeat forecast came after the venture won Beijing’s approval to produce sedans in China, clearing a hurdle to cash in on one of the world’s fastest-growing markets.
China Motor is a unit of Yulon Group, which includes Yulon Motor, Taiwan’s third largest car producer, Reuters added.
According to the report, Hsu said Soueast, which started out in 1996 making several hundred vans, expects to sell 85,000 to 90,000 vans and sedans this year, down from the previous forecast of 100,000.
