The central government's measures to cool down the economy have taken a toll on the mainland's booming car-making industry, with one manufacturer in Yunnan recording a 40 per cent production drop during the past two months.
Wang Yuexing, deputy general manager of FAW-Hongta Yunnan Automobile Company in Qujing, Yunnan, said it was unlikely to attain its production target of 65,000 vehicles this year.
The measures and rising steel costs have left many small and medium-sized factories fighting for survival, he said. Mr Wang's firm is the sixth-largest maker of small vehicles on the mainland, selling more than 40,000 units last year.
'Since the end of last year, prices of steel have increased by 40 per cent. At the same time, we are facing greater competition from other carmakers and we have to cut our price aggressively. This makes the profit margin very slim.'
Gross profit was only about 2 to 3 per cent, Mr Wang said. The price for a lightweight truck, his firm's most popular product, has dropped from 40,000 yuan per unit last year to 30,000 yuan this year.
The government's drive to cool the economy had also dampened demand for the company's products, Mr Wang said. 'We originally planned to produce 5,000 [light-weight trucks] a month. But we now can only produce 2,000 to 3,000 units [a month] in view of declining demand.'