FAW Car Co., China's largest automaker, said its net profit could drop by over 50 percent in the first half of this year due to rising costs, sluggish sales and falling car prices.

Local newspaper Beijing Daily reported Thursday, quoting a notice of the company released on Wednesday, said the company's net profit stood at 322.48 million yuan (39 million US dollars) in the first six months of 2004.

However, the notice did not elaborate on the company's performance in the first half of this year.

The Changchun-based FAW Car Co. in northeast China's Jilin Province, makes Red Flag sedans and Mazda 6 models under a technical license from Mazda Motor Corp.

Car sales in China reported a downward trend starting in May 2004 after the government tightened credit for car buying in a bid to control the spending and investment in overheating sectors, such as steel, property, and autos.

Although China's car prices rose slightly in May, the sedan prices continue to fall by 7.93 percent compared with May in 2004, the report said.

Chinese customers, nevertheless, have showed restraint in buying cars despite the falling prices. The rising fuel prices also pose a great concern, which induces them to turn to economy models instead of big size and luxurious ones.

Source: Xinhua