SHANGHAI-- SAIC Motor Corp., China's largest auto group by
sales, Wednesday said net profit rose 18% in the first half of the
year because of strong sales at its joint ventures with Volkswagen
AG and General Motors Co.
The Shanghai-based auto maker said net profit advanced to 13.6
billion yuan ($2.2 billion) for the six months ended June 30 from
11.5 billion yuan a year earlier.
Motor-vehicle sales by SAIC grew 12% to 2.86 million units in
the period, outpacing the 8% gain recorded by the country's auto
industry, according to the China Association of Automobile
Manufacturers.
Cars built by Shanghai Volkswagen Co. and Shanghai General
Motors Co. continued to be popular in China thanks to a perception
that foreign brands have a significant edge over local players in
manufacturing quality and safety. In the first half of the year,
five of China's 10 best-selling cars were built by SAIC's joint
ventures with VW and GM, data from industry group China Association
of Automobile Manufacturers showed.
With the auto maker's foreign partners continuing to launch car
models in China, analysts have been upbeat about SAIC's earnings
growth and stock performance. Guotai Junan Securities forecast a
15% rise in SAIC's net profit this year and China International
Capital Corp. raised its target price for the company to 22 yuan
from 20 yuan. Shares of SAIC closed at 16.32 yuan Wednesday and
have risen 15% so far this year.
Still, SAIC's earnings report illustrated the difficulties
China's homegrown car brands are facing in competing with foreign
car makers. SAIC's own brands--Roewe and MG--fared poorly, with
sales down 3% in the first half compared with the year-earlier
period.
China's domestic car makers have been struggling as foreign
companies produce cheaper vehicles, moving into what used to be the
realm of Chinese players. In recent weeks, Great Wall Motor Co., a
leading maker of sport-utility vehicles, said its first-half net
profit fell 3% from a year earlier, and Tianjin Faw Xiali
Automobile Co., a compact-car maker, said it would report a net
loss of at least 400 million yuan for the period.
At a recent meeting with SAIC's shareholders, Chairman Chen Hong
said the company would establish a venture-capital firm in Silicon
Valley to tap advanced technology in a bid to bolster its own
brands at home. "Building a brand is an arduous job," the chairman
said. "Chinese car makers must go upscale, otherwise the situation
will be worse.
Rose Yu
Subscribe to WSJ: http://online.wsj.com?mod=djnwires