Brilliance plans new factory in Guangdong
Struggling carmaker Brilliance China Auto Holdings has plans to turn around mounting losses including building a production plant in Guangdong to boost sales.
'Having two production bases can help cut operation costs and increase market share. Transporting a finished minibus from the production base in northern China to the south costs 2,000 yuan,' Brilliance chairman Qi Yumin said.
'People in southern China are wealthy enough to buy a car. It would be another good starting point to develop the group's business.'
The company, based in Shenyang, Liaoning province, last week 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 to 60,000 units while BMW sales through a joint venture soared 101 per cent to 17,501 units.
Adding pressure on the company's finances is a US$200 million bond that is due for refinancing.
Capital expenditure for the next three years is expected to be 1.24 billion yuan. The group did not indicate any plans for fund raising in the near future.
Of the 5.7 million cars sold in China last year, only 70,000 came off the Brilliance China production line.
Chief financial officer Zha Jianping said that in order to increase market share, the company must have a strong presence in both Beijing and Guangzhou.
Mr Qi said plans for a plant in southern China would be announced by the middle of the year.
'In five years' time, I plan to raise the Zhonghua sedan's market share from 0.35 per cent to 4 per cent which would account for 40,000 units and hopefully to lift market share of minibuses from 42 per cent to 50 per cent,' he said.
The group is planning to produce 20 new models this year ranging from a 50,000 yuan model up to a 239,800 yuan model.
Mr Qi said the group cut car prices by an average of 15,000 to 18,000 yuan per unit last year, but ruled out further price-cutting this year.
'However, I have to emphasise that the cost of production is on average 10 per cent lower. With more new models, I believe the gross profit will be higher in the future.'
With the Shengyang factory operating at a 55 per cent utilisation rate, the group has total production capacity of 220,000 cars.
Mr Qi, who took over as chairman early this year, is reluctant to give a timeframe for returning to profit but said the situation would be much clearer from the interim results this year.
He said a quality control manager from Europe had been hired to improve overall quality control.
'Chinese-brand cars are much cheaper than cars made in Europe and the United States,' he said.
'But we hope that Chinese cars can attain the same quality level as cars made in Europe and the US, which would give us the power to raise prices.'