After the automotive industry regained its profitability in 2005, it finally reached a peak of positive results in the first half of this year. Recently, several major listed companies, including G-Shangqi, G Jinlong, G Sedan, G Chang’an, and G Jiangling, announced their semi-annual performance or preliminary profit estimates. The net profits of these automotive firms have seen a significant year-on-year increase, signaling a strong recovery for the entire sector.
**Current Situation:**
**Significant Year-on-Year Performance Growth**
This year, the performance of listed automotive companies has shown a notable improvement. According to data from the previous quarter, revenue for automotive firms rose by 25% year-on-year in the first quarter, while net profit increased by 9.67%. In semi-annual reports from some companies, the upward trend continues. For example, SAIC Motors reported that key financial indicators in the first half of the year showed strong growth, with net profit increasing by 14.01% year-on-year.
The recovery of the auto industry has also benefited companies involved in auto parts. Even though some automakers have not yet released their full results, analysts expect their performance to be significantly improved in the first half of the year.
**Analysis:**
**Strong Demand Drives Production and Sales**
The improved performance of listed companies reflects the full recovery of the automotive sector. According to statistics from the National Development and Reform Commission, the growth rate of automobile production and sales has accelerated sharply in the first half of the year. Output rose by 27.8% year-on-year, and vehicle sales increased by 26.7%. Meanwhile, the profits of the national automotive industry surged by 58.5%, reaching 35.8 billion yuan.
According to the companies that have released their announcements, the main driver behind the profit growth is the substantial increase in production and sales due to strong market demand. SAIC stated, "The fundamental reason for our performance growth is the improvement in the market environment."
Dongfeng Nissan’s sales department noted that the automotive market had a relatively strong performance in the first half of the year, driven by high consumer demand. On one hand, reduced tariffs and the implementation of the new automobile consumption tax have led to lower car prices, encouraging more consumers to make purchases. On the other hand, the decline in steel prices since last October has helped ease cost pressures on manufacturers.
**Prediction:**
**Car Prices Continue to Fall, Sales Remain Stable**
Will the growth momentum from the first half continue into the second half? Most industry experts are optimistic. They believe that the auto market will maintain a positive trend.
Industry insiders predict that car prices will continue to fall in the second half of the year, but overall sales will remain stable. According to the “China Automotive Industry Quarterly†report released by the State Council’s Development Research Center, the passenger vehicle market has shown clear growth, with car prices declining slightly since last year. It is expected that passenger vehicle sales will continue to grow rapidly in the second half of the year, although at a slightly slower pace, around 25% to 30%.
Haitong Securities’ latest report suggests that the automotive industry is still in a growth phase, with steady earnings expansion. Due to long-term rising demand for cars among domestic consumers, the sector is expected to maintain an average annual growth of 20% before 2011. Considering factors such as falling profit margins and car prices, the average profit growth for sedans over the next six years is projected to be between 3.18% and 10.07%.
**Some Auto Listed Companies' Interim Results:**
- **G Jinlong**: Revenue up 77.90%, net profit up 30.15%
- **G SAIC**: Revenue up 54.42%, net profit up 14.01%
- **Ningbo Huaxiang**: Revenue up 212.17%, net profit up 332.73%
- **AVIC Precision Machinery**: Revenue up 103.54%, net profit up 133.6%
- **G Car**: Net profit increase of 50% to 100%
- **G Changan**: Net profit increase of 45%
- **G Jiangling**: Net profit increase of 60%
- **FAW Xiali**: Net profit increase of 200%
**Industry Views:**
Li Chunbo, an analyst at CITIC Securities, believes that the second-half growth rate will likely be lower than the first half. He points out that rapid expansion of production capacity and fierce competition may lead to a decline in gross profit margins. Currently, the gross margin of the domestic auto industry is still high, and in the future, it should decrease to a level slightly above that of developed countries.
Jia Xinguang, chief analyst at China Automotive Industry Consulting and Development Co., Ltd., emphasizes that China remains the world's largest automotive market. Despite a slight drop in sales in May and June, he believes the market remains strong and the upward trend will continue. With further improvements in new vehicle production capacity in the second half of the year, he is confident about the market performance in the coming months.
**July Total Sales:**
According to the National Passenger Vehicles Association, a total of 280,000 vehicles were sold in China in July, a 12.3% drop from June’s 319,000 units. However, compared to the same period last year, the growth rate of the domestic auto market is still around 20%, showing a positive trend overall.
In terms of monthly sales, FAW-Volkswagen ranked first with 29,501 units sold, followed by Shanghai General Motors with 24,445 units. Shanghai Shanghai Motors came in third with 26,088 units, while Beijing Hyundai Motor and FAW Toyota ranked fourth and fifth, respectively, with 24,160 and 19,262 units sold.
July’s sales decline is considered normal, as it is typically the lowest point of the year for passenger car sales. Analysts expect this trend to reverse starting in August, as the off-season ends and demand gradually picks up.
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