BEIJING - Boosted by
buoyant sales, China's auto sector reported a
surprisingly sharp rebound in profits for 2006,
according to industry reports, but the pace is
predicted to slow this year.
Combined
profits for the industry, including vehicles,
engines, spare parts and motorcycles, rose by 46%
to 76.8 billion yuan (US$9.9 billion) last year,
according to statistics from the China Association
of Automobile Manufacturers.
The robust
growth beat the estimates of most analysts, who
predicted the sector's 2006
profits would rise about 20%.
Strong
overall performance last year came after two
consecutive years of profit decreases due to
slowing sales, rising costs and heated price wars
in the domestic car market.
Profits fell
by 24.3% in 2005 and 5.2% in 2004.
Vehicle
manufacturing, the top profit center for the
entire auto sector, earned 34.2 billion yuan last
year, a surge of 47.7%, according to the year-end
report.
Song Bingshen, an analyst with
CITIC China Securities Co, attributed the hefty
profits last year to stronger-than-expected
vehicle sales and a record introduction of new
models.
Sales of China-made vehicles
climbed 25% to 7.22 million units last year, which
enabled the country to surpass Japan as the
world's second-largest vehicle market. The
increase was up from 13.5% in 2005.
"Car
price cuts failed to squeeze profits last year as
most reductions were on older models," Song said.
"Car makers launched many new products, which
contributed significantly to their sales."
However, analysts anticipate the sector's
profit growth this year will decelerate as a
result of slower vehicle sales and bigger price
reductions.
Song said the industry is
expected to register profit growth of 15% this
year, while vehicle sales are expected to rise by
20%.
Hua Xue, president of cheshi.com.cn,
a Beijing-based website for online car sales and
price tracking nationwide, said prices will fall
by more than 6% this year.
"Many car
makers have set lofty sales goals this year
inspired by strong performance last year," Hua
said, "but the market will not grow as fast as
they expect."
"They will have to cut
prices, especially in the low and medium segment,
to achieve their targets," he said.
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