China Watch : SAIC Motor Q1 net profit down nearly 50 percent

Automotive News Europe/Reuters, 28th April, 2009

SHANGHAI (Reuters) SAIC Motor Corp., which owns the remnants of the British MG Rover carmaker, on Tuesday posted a fall of nearly 50 percent in first-quarter earnings. The company also runs car manufacturing ventures in China with General Motors and Volkswagen.

SAIC Motor said it booked 626.9 million yuan ($91.8 million) in net profit from January to March, which reversed losses in the fourth quarter. The company posted 1.24 billion yuan in net profit in the first quarter of 2008. For the full year of 2008, net profit dropped 85.8 percent to 656.2 million yuan, worse than the 55.1 percent fall forecast by Reuters Estimates.

“The weak results for 2008 are no surprise at all due to the unexpected downturn of the car market in the second half. But the market is warming up since February and SAIC is already showing improvement in Q1 compared with Q4 of 2008,” said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.

The weak results for 2008 are no surprise at all due to the unexpected downturn of the car market in the second half. But the market is warming up since February and SAIC is already showing improvement in Q1 compared with Q4 of 2008,” said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.

The Shanghai-based automaker returned to the black in the first quarter, reversing a 1.57 billion yuan net loss during the October-December period, according to Reuters calculation. However, SAIC Motor remains cautious. “The outlook for the 2009 domestic auto market is not so optimistic with lots of uncertainties ahead,” it said in a statement.

The company said it aimed to sell 1.8 million vehicles in 2009, down slightly from 1.83 million sold in 2008, generally in line with the country’s overall market, which it predicted would remain flat for the year. Its turnover target for 2009 was 119.4 billion yuan, up from 105.89 billion yuan in 2008.

SAIC Motor owns MG Motor UK, which is the remnants of the former MG Rover Group in Longbridge, central England. MG Motor UK sells MG TF LE500 two-seater sports car in the U.K. The car is assembled at Longbridge from kits shipped from China.

VW, GM joint ventures post record sales

Car sales growth in China, which in January topped the United States as the world’s largest auto market, slowed to a single-digit rate last year for the first time in at least 10 years as the global economic downturn struck home. However, consumers, encouraged by the government’s policy support, including tax incentives, are returning to showrooms pushing car sales to an all-time monthly high in March.

SAIC Motor’s own-brand cars, including Roewe 750 and 550 sedans and the MG series of models surged four-fold to 18,000 units. Its partners GM and Volkswagen both set fresh monthly records for March in their China vehicle sales.

SsangYong remains a big issue hanging out there for SAIC, but without additional provisions presumably this year, its results for 2009 could be prettier,” said Chen.

SAIC Motor’s vehicle sales rose 8 percent in 2008, outperforming a 6.7 percent gain in the China market. Its domestic market share came to 18.5 percent at the end of the year, up 0.8 percentage points, it said. Sales of passenger cars in the country climbed 1.9 percent to 1.03 million units, with commercial vehicle sales up 28.1 percent to 708,000 units, it added.

Dragging down SAIC’s 2008 earnings were the 3.08 billion yuan provisions it made for its 51.33 percent-owned loss-making South Korean subsidiary SsangYong Motor Co. Earlier in the month, SsangYong, which is now under court receivership, said it needed to slash 36 percent of its workforce and sell assets in an effort to avoid bankruptcy.

“SsangYong remains a big issue hanging out there for SAIC, but without additional provisions presumably this year, its results for 2009 could be prettier,” said Chen.

[Source: Automotive News Europe]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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