Shanghai Automotive Co., the local partner of General Motors and Volkswagen AG, said its net profit for the first quarter of the year may be up by 300 percent.

The surge in profit is driven by robust sales and the purchase of money-making businesses from its parent company, the Shanghai Automotive Industry Corp.(SAIC), in November.

The automaker said in a statement to the Shanghai Stock Exchange on Thursday that its net profit stood at 222.9 million yuan (28.8 million U.S. dollars) in the first quarter of 2006.

Analysts said that rapid economic growth and rising household incomes in China will continue to fuel car sales in the coming years.

The company said that, with the car market projected to grow 15 percent to hit 8 million units, it is aiming at 3.1 billion yuan of net profit and sales of more than 1.5 million automobiles this year.

China overtook Japan last year to become the world's second largest market for new vehicles after the United States with new vehicles sales soaring 25 percent to 7.22 million units.

Net profit of the nation's top car seller jumped 30 percent year-on-year to 1.4 billion yuan last year and its sales nearly quintupled to 30.5 billion yuan, according to its annual report released on Thursday.

Despite the upbeat announcements, shares in Shanghai Automotive Co. slipped back by 1.08 percent to finish at 13.71 yuan on Thursday.

(one U.S. dollar equals 7.73 yuan)

Source: Xinhua