4 Min Read
* China auto sales hit record in April
* Automakers' earnings remain weak
* Full-year bottom lines may improve - analysts (Releads with data from industry group, adds analyst comments)
By Fang Yan and Michael Wei
SHANGHAI, May 8 (Reuters) - China's passenger car sales in April rose 37.4 percent from a year earlier to a record high, the country's official industry association said on Friday, bolstered by government stimulus measures.
But analysts say Chinese automakers are in no mood to celebrate as double-digit volume growth, mostly in compact models, have done little to boost company bottom lines.
Nineteen out of 61 domestically-listed automakers and parts suppliers posted losses from January to March, compared with 10 in the same period last year, data provided by Guotai Junan Securities showed.
Several big auto groups, from SAIC Motor Corp (600104.SS) to Chongqing Changan Automobile Co (000625.SZ), reported steep falls in their first quarter earnings despite brisk vehicle sales. [ID:nSHA63895] "A lot of the volume was coming from compact cars and mini vans as buyers for such models could get tax incentives or subsidies. And small cars mean thin margins," said Chen Qiaoning, an analysts with ABN AMRO TEDA Fund Management.
Chen was referring to Beijing's stimulus policies implemented earlier this year, including halving of purchase tax on small cars and subsidies to farmers who trade in their high-emission vans and trucks for fuel-efficient ones.
Passenger car sales climbed to 831,000 units in April, up from 604,900 units from a year earlier and 772,400 in March, data from the China Association of Automobile Manufacturers showed.
Analysts said the financial outlook of the industry may improve if steel and oil prices, which hovered at record high levels for the first six to seven months of 2008, remain stable.
"Beijing's stimulus policies are having a longer-lasting effect than expected," said Qin Xuwen, an analyst with Orient Securities. "As long as volume continues to grow, which is quite likely given the records in March and April, and there is no sudden spike in commodity prices, bottom lines of automakers will improve this year."
Qin expects SAIC's earnings per share to jump to 0.4 yuan this year from 0.10 yuan in 2008. Its previous year's weak earnings were due in part to a whopping 3.08 billion yuan ($452 million) in provisions made for its loss-making subsidiary Ssangyong Motor Co (003620.KS).
Changan Auto's full-year earnings may also improve from an 89 percent drop in the first quarter, he said, without providing specific figures. Sales at Changan's car venture with Ford Motor (F.N) and Mazda Motor (7261.T) jumped a third in April. [ID:nSHA192988] Analysts are also counting on aggressive new model launches by foreign automakers, which dominate the lucrative mid-to-high end segment, to bolster the bottom lines of their Chinese joint venture partners.
General Motors (GM.N), which makes sedans and minivans in China in partnership with SAIC, will roll out at least five new models under the Buick and Chevrolet brands over the next two to three years. [ID:nSHA265925]
"Many foreign automakers are stepping up their new model offensives here as mature markets slump. That could be a big draw for middle class buyers especially those eyeing their second cars," said Zhang Xin, an analyst with Guotai Junan Securities.
($1 = 6.82 yuan)
Additional reporting by Jacqueline Wong