Profits Soaring For China's Auto Producers.(Brief Article)(Statistical Data Included)

Profits from China's major automakers are rising with the help of robust domestic sales due to strong demand. According to statistics from the State Economic and Trade Commission (SETC), the nation's 15 key automakers earned total profits of 10.57 billion yuan ($1.27 billion) during the first half of this year, an increase of 22.70 per cent from the same period of last year. Their profits in July alone reached 2.01 billion yuan, up from 1.43 billion yuan from the monthly average during the first half of this year, the statistics showed.

The profit growth mainly resulted from the increasingly strong demand for vehicles on the domestic market, said Li Hong, an official from the commission. Sales of domestically made vehicles increased by 31.23 per cent year on year to 1.80 million units from January to July this year, according to the China Association of Automobile Manufacturers.

Jiang Xingguang, an analyst from the China National Automotive Industry Consulting and Development Corp, said the government's non-tariff measures to control vehicle imports also contributed to the profit growth of domestic manufacturers, despite the nation's tariff cut dropping from 70-80 per cent to 43.8-50.7 per cent at the beginning of this year.

These measures, especially that on import license distribution, have helped prevent vehicle imports from skyrocketing and massive price wars among domestic carmakers since April, Jia said. According to the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), China imported around 67,000 vehicles in the first seven months of this year, up 45.30 per cent from a year earlier. The imports were much less than what was expected by analysts at the beginning of this year as a result of the control on vehicle import license distributions.

Profits from China's top three vehicle manufacturers First Automotive Works Corp., Shanghai Automotive Industry Corp. and Dongfeng Motor Corp. grew by 2.91 billion yuan ($350.60 million) year on year during the first seven months of this year, accounting for 93 per cent of the total profit increase of the nation's 15 key automakers, said SETC.

But Chinese automakers should not rest on their laurels, Jia warned. Domestic makers have no reason to be very optimistic because they will not be able to maintain lofty profit margins thanks to further import increases later this year and next year, he said.

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