NEW taxes on car imports to Hong Kong had a hard effect on profits at Inchcape Pacific, a subsidiary of British group Inchcape. Net earnings for the year to December 31 were down 24.6 per cent to $734 million, compared with $973 million in 1993. Turnover dropped one per cent to $12.64 billion. Paul Cheng Ming-fun, chairman of Inchcape Pacific, said last year started with promise but the market for vehicles dropped sharply because of tax changes for cars and because of negative consumer sentiment on the back of depressed stock and property markets. 'Sales of Japanese vehicles were also adversely affected by the strength of the yen,' he said. While operating profits were a healthy $840 million, within three per cent of 1993's record level, it was the contribution from associate firms which fell the most dramatically. Their contribution dropped from $275 million in 1993 to $108 million last year, a decrease of 60.7 per cent. During the period, Toyota Motors South China, a business which imported cars to China, was discontinued. In 1993, the business had contributed $162 million to pre-tax profits of $1.18 billion. The 1993 figures also included an $89 million exceptional item from the sale of a building. Mr Cheng described last year's trading conditions as difficult. 'Despite difficult trading conditions hurting the year, we were able to keep within three per cent of our record performance in 1993 for our on-going operations.' The territory's motor vehicle market dropped after the introduction of a revised registration tax on August 1. Sales of cars remained sluggish in China. Mr Cheng blamed the continued impact of austerity measures. 'Nevertheless, we continued to build our business in China,' he said. Moves included the acquisition of a 60 per cent stake in a car distribution service. Mr Cheng said the group's 'branded lifestyle' division also had a good year. 'Timberland and K Swiss achieved further sales growth,' he said. Office automation sold well in Hong Kong, but slowly on the mainland. Mr Cheng said the group's product-testing division performed strongly all over the region. He said: 'China remains a priority market for the Inchcape Group. 'We see potential in China, and are confident about the country's long-term development.' He said the company had about 2,000 employees in China in more than 20 cities. The parent group's full-year results revealed an 8.6 per cent decrease in pre-tax profits to GBP230.6 million (about HK$2.83 billion), depressed primarily by a poor performance in the group's Hong Kong and European motor vehicle operations. Earnings per share collapsed 13.2 per cent to 26.4 pence, although the dividend increased 1.4 per cent to 15 pence. Operating profit was down 3.3 per cent to GBP210.5 million, from GBP217.9 million. Company chairman Sir David Plastow said the group had been badly affected by the increasing strength of the yen against other currencies.