Manufacturing News

Automakers' rocketing Q1 profits sparks "overheating" concern

Currently, almost all China's automakers have released their financial reports for the first quarter of 2010 and most of them witnessed doubled profits. However, the rapid growth leads to the market's concern of the overheating in the auto industry, and the Entrepreneur Confidence Index in the auto industry is declining.

According to the data from the National Bureau of Statistics (NBS), China's auto producers' profits for the first two months of 2010 reached 29.3 billion yuan (4.29 billion U.S. dollars), up 542 percent year on year.

Profits of domestic-brand auto producers soared 8.5 times, increasing from last January and February's 700 million yuan to 6.7 billion yuan over the first two months of 2010. Profits of joint ventures set up by foreign carmakers in China increased from 4.58 billion yuan to 19.4 billion yuan. Auto sales in the first quarter surged 72 percent.

Analysts said that the relatively large production capacity and inventories of auto producers formed a high auto sales. The cost and management charges has been amortized in last year's financial reports. Hence, most of their sales revenues is calculated as profits. But with the increase of inventories, the high growth is not sustainable.

Auto companies' profit growth may slow down in the second half year, according to some analysts. In March, 2010, sales growth of car models below 1.6 L exhaust emission surged 28 percent, 6 percentage points lower than the average growth rate of passenger car sales, meaning that effect of policy is fading.

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