Wednesday 29 April 2009

SAIC to spend 15.3b yuan developing own brands

SAIC Motor Corp, China’s largest carmaker, said yesterday it planned to spend 15.31 billion yuan (HK$17.41 billion) this year to develop own-brand vehicles and the related technologies.

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SAIC to spend 15.3b yuan developing own brands

Kandy Wong
29 April 2009

SAIC Motor Corp, China’s largest carmaker, said yesterday it planned to spend 15.31 billion yuan (HK$17.41 billion) this year to develop own-brand vehicles and the related technologies.

The carmaker, a joint-venture partner of General Motors and Volkswagen, also said it booked 626.9 million yuan in profit in the first three months, down from 1.24 billion yuan in the same period last year.

SAIC recorded a worse than expected net profit of 656.2 million yuan for 2008, down 85.8 per cent because of slower sales in the second half. It also made a provision of 3.08 billion yuan for its 51.33 per cent owned loss-making South Korean subsidiary Ssangyong Motor, which filed for court receivership in January.

“We’re not optimistic about the vehicle market’s outlook this year, as it is still full of uncertainty,” said chairman Hu Maoyuan in the company’s results statement. “But the increasing consumption power in the second- and third-tier cities will provide business opportunities.”

SAIC sold 1.83 million vehicles last year, up from 1.69 million in 2007. The carmaker expects total sales to reach 1.8 million units this year.

Hou Yankun, an analyst at Nomura, said he was concerned about the profitability in the industry because of the deteriorating product mix of carmakers and possible price competition.

Meanwhile, China Merchant Securities estimates SAIC’s Roewe division recorded a net loss of 200 million yuan last year, while its merger with Nanjing Automobile Group resulted in a 500 million yuan loss.

“SAIC has been hit by the consumer sentiment, a lack of new brands from General Motors and the loss at Ssangyong Motor,” said analyst Wang Liusheng at China Merchant Securities.

“The negative impact will ease this year as the consolidation of distribution networks for its brands Roewe and MG will save operation costs and create synergy.”

Sales of the carmaker’s own-brand cars, including Roewe 750 and 550 sedans, rose fourfold last year to 18,000 units.

“The company will focus on developing alternative-energy vehicles to get a larger market share,” said Mr. Hu.

The carmaker has poured 2.9 billion yuan into developing environmentally friendly vehicles, as of the end of last year.