Brilliance China Automotive Holdings' Zhonghua car division reported an operating loss in the second half of last year, reflecting cut-throat competition in the local-brand segment.
According to a Standard & Poor's research report released yesterday, the division lost 112 million yuan in the June to December period on slowing sales, compared with an operating profit of 135 million yuan in the first half. The operation accounted for 33 per cent of the company's sales revenue last year.
A Nomura Securities report said sales in the first quarter of this year plunged 61 per cent year on year to 3,270 units, with market share dropping to 1.1 per cent from 1.5 per cent for all of last year. First-quarter sales in the entire car market grew 45 per cent year on year.
Zhonghua has a lot of catching up to do if the firm is to reach this year's sales target of 25,000 units.
To boost sales, Brilliance cut Zhonghua prices about 10 per cent recently. It has also announced plans to launch new models, a strategy that prompts scepticism among industry analysts.
'We are concerned about the company's decision to invest 500 million yuan to develop new sedan models in a bid to claw back market share,' Nomura wrote in its report. This raised business risks, it said.