Earnings look bright for joint-venture carmakers in China
Strong sales under joint-venture brands are setting up bright earnings reports by carmakers Brilliance China Automotive and Dongfeng Motor for the first half, but their homegrown peers lacking such partnerships are expected to unveil crimped profits.
"Sales growth of joint-venture brands beat local brands in the first half, and the trend will continue in the second half," said Harry Chen, a vehicle analyst at Guotai Junan Securities.
Brilliance China is expected to outperform its rivals, boosted by impressive sales from its venture with Germany's BMW, Chen said. Its results for the first six months are due tomorrow.
Morgan Stanley forecasts the mainland carmaker will post a 62 per cent profit growth for the half to 3.4 billion yuan (HK$4.27 billion) from the same period last year, citing a 33 per cent gain in sales at its BMW venture.
Bocom International is also upbeat on Brilliance's earnings. It estimates profit growth of 78.4 per cent to 3.6 billion yuan.
Dongfeng Motor, which partners Japan's Nissan and Honda, was expected to see first-half profit rise 23 per cent to 6.8 billion yuan, JP Morgan said in a research report. It sees sales from the Honda venture rising 21 per cent, boosted by a new model in the second quarter. Sales at the Nissan joint venture are expected to rise 18 per cent, with 38 per cent growth in sales at its venture with France's PSA Peugeot Citroen, the report said. Dongfeng is due to release its results on August 29.
The mainland's car sector has been buffeted by anti-monopoly investigations targeting luxury foreign carmakers, but analysts expect only a limited impact on joint venture and local brands.
However, the market share of domestic marques in passenger cars fell to 37.3 per cent in the first half, 3.12 percentage points lower than for the same period last year, China Association of Automotive Manufacturers data showed.
Chen said Zhejiang Geely and Great Wall Motor were likely to be among the homegrown carmakers being shaded by their joint venture rivals. Most carmakers will release first-half results over the next weeks.
The decline in sales of local mainland brands had been evident since the second half of last year, he said, taking a toll on their first-half performance.
Some carmakers planned to launch new models by the end of this year, but Chen said he did not expect any significant lift for full-year revenue as the sales period would be too short.
Brokerage Shenyin Wanguo Securities forecasts first-half profit for Geely, which owns Swedish brand Volvo, will drop 30 per cent to 12 fen per share from the same period last year.
Great Wall Motor said in a filing to the stock exchange last month that first-half net profit would fall 3.1 per cent to 3.96 billion yuan from the prior year, based on preliminary data.