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Ford's Chinese partner Changan Auto Co. Ltd. swung to a third-quarter loss and warned Monday that full-year earnings could plummet by more than half in 2005 as higher production costs and heightened competition eroded profits.
Changan Auto, China's fourth-largest vehicle maker, posted a 77.26 million yuan (US$9.56 million) net loss from July to September, versus a gain of 245.95 million yuan a year earlier.
That followed a 77 percent earnings slide in the second quarter.
Turnover rose 18 percent to 3.86 billion yuan as the company, which also makes compact cars with Japan's Suzuki Motor Corp., more than doubled non-core revenue during the period to 1.37 billion yuan. It did not specify where the increase in non-core revenue came from.
"The auto industry saw a significant drop in profitability on sliding sales, higher raw material prices and intense competition," the firm said in a statement carried in the Securities Times.
"We expect an earnings fall of over 50 percent for 2005."
Changan Auto, formerly a military-run auto parts supplier, said it sold 335,910 vehicles in the first nine months, down over 1 percent, while output rose 6.5 percent to 373,386 units.
Car sales in China, the world's third-largest vehicle market, climbed a moderate 16.8 percent in the period. Growth had slowed to just 15 percent in 2004 after a near-doubling in 2003, as the government cracked down on easy auto loans.
Experts now expect the market to grow just 10 to 15 percent in 2005 as the government keeps up credit curbs aimed at bringing about a soft landing of the world's seventh-largest economy.
Last week, Shanghai Automotive Co., owner of a fifth of General Motors' largest car venture in China, reported a 9 percent fall in third-quarter net profit, as it struggled with the same industry slowdown.
(Shenzhen Daily November 1, 2005)
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