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Eric Ng

Kandy Wong

Geely eyes 35pc turnover rise and Dongfeng 15pc, while Brilliance expects profit margin erosion to slow

Three Hong Kong-listed mainland carmakers have unveiled optimistic sales growth targets for this year, which, if achieved, could help offset the impact of price cuts and protect profit margins.

Speaking to reporters after posting  a 38.4 per cent decline in net profit to 1.6 billion yuan for last year on Wednesday, Dongfeng Motor Group chairman Xu Ping  said the firm's sales volume growth this year should exceed the industry estimate of 10 per cent to 15 per cent.

Adjusting for financial restructuring to prepare for the company's listing in December and factoring in other figures to make year-on-year comparison meaningful, net profit would have risen 21.3 per cent last year,  said Dongfeng, which has joint ventures with Japan's Nissan and Honda, as well as France's Peugeot Citroen.

Mr Xu said the higher volume should be able to offset a 5 per cent to 8 per cent price cut. Dongfeng,  China's third largest carmaker, has an 8.5 per cent market share.

'We don't cut prices easily, we have an overall plan for it,' he said. 'We'll use sales volume to balance price cuts.'

Judging from the first-quarter results, the company expects  to maintain last year's 13.1 per cent gross margin  in  the first half of this year, Mr Xu said.

Small passenger car producer Geely Automobile Holdings, which yesterday reported a 36.3 per cent increase in net profit to  $110.82 million,  set a sales target of 180,000 units for this year.

This is 35.3 per cent higher than the company's actual sales of 133,041 units last year.

'If we achieve the target and if  sedan sales in the mainland grow 20 per cent to 3.5 million units this year, we would have a 5 per cent market share,' said executive director Laurence Ang Siu-lun.

The carmaker had a 4.8 per cent market share at the end of last year, according to figures from the  China Association of Automobile Manufacturers.

The company earlier raised the target by 10,000 units after two  car-producing associates, in which it owns 46.8 per cent, reported that combined year-on-year sales  grew 66.9 per cent to 48,438 units in  the first quarter this year.

Despite cutting the prices of some products  6 per cent to 11 per cent earlier this year,  Brilliance China Automotive Holdings should not see its overall profit margin  erode significantly as economies of scale from bigger production volume and cheaper outsourced parts should be able to offset the price cuts, according to executive director Qin Daqing.

Brilliance  posted a net loss of 649.6 million yuan for last year, compared with a profit of 48.56 million yuan in 2004.

The loss included a 300 million yuan impairment loss on the intangible assets of its Zhonghua sedan operation  whose sales declined 18 per cent last year to 9,000 units.

Minibus sales fell 2.6 per cent last year to 60,000 units while BMW sales through a joint venture soared 101 per cent to 17,501 units.

Mr Qin said the company aimed to sell 40,000  Zhonghua sedans, 62,000 minibuses and 18,000 Granse multi-purpose vehicles.

The executive director would not give a target for BMW sedans, citing a confidentiality arrangement with BMW.

So far this year, Brilliance's overall sales grew 33 per cent year-on-year to 28,528 units, of which BMW sales surged 70 per cent.

Chairman Wu Xiaoan said the operation still had 800 million yuan worth of intangible assets after the write-down,  and that no further write-down would be necessary if it achieved  its target this year.



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