China's auto industry suffers downward profits for two years

China's auto market has experienced profit drops for two consecutive years while production was rising.

The latest statistics by the National Bureau of Statistics show that the auto profits went down further last year by 38.4 percent following a plunge of 18.3 percent in 2004. The sales profit also contracted sharply to 4 percent in 2005 after it shrank to 6.85 percent in 2004 from 9.11 percent in 2003. That is even below the average margin of 4.46 percent in the manufacturing sector as a whole.

Statistics also record a year-on-year increase of 26.9 percent in sedan production in 2005 to more than 2.95 million units. The growth is 15.2 percentage points faster than that in the previous year. In the second half of last year in particular, the car production soared 53.1 percent, much faster than the first half by 47.9 percentage points. In December 2005, a record of 3.08 million cars were turned out, 60.2 percent more than the same month of 2004.

Analysts forecast an upward beginning followed by a downturn in terms of sedan supplies and sales in 2006. The growth will generally be close to or slightly lower than that in 2005. Profits in the auto market will hopefully rebound after a two-year decline but the chances of being back to the level in 2003 and 2004 are still dim.

By People's Daily Online