SAIC Motor’s near 6pc interim profit rise falls short of expectations
A slowing Chinese auto market and stiff competition from rivals dent earnings growth
SAIC Motor, China’s largest automaker by sales volume, has posted a lower than expected increase in its first-half profit amid a slowing Chinese vehicle market.
Net profit for the six months to June rose nearly six per cent to 15.96 billion yuan (US$2.4 billion), on the back of a 12.9 per cent jump in revenue to 396.4 billion yuan.
The interim earnings, or 1.38 yuan per share, slightly fell short of an average forecast of 1.46 yuan a share by four analysts.
Underlying profit in the January-to-June period gained 12.2 per cent to 15.68 billion yuan.
“Despite the stable national economic growth, the domestic auto market turned sluggish in the first half due to tax policy changes,” the company said in a filing to the Shanghai Stock Exchange.
“The company will take advantage of the consumption upgrade by Chinese people to optimise product structure,” it said.
SAIC reported sales of 2.76 million units in the first half, up 7.7 per cent from the same period in 2016.
The year-on-year sales growth by SAIC was 3.5 percentage points higher than the national figure.
Passenger vehicle sales across the mainland, the world’s largest auto market, grew 4.2 per cent to 13.5 million units in the first six months.
Beijing decided to roll back a tax incentive it introduced last year to bolster sales of smaller cars.
The purchase tax for cars with engines of 1.6 litres capacity or lower was raised to 7.5 per cent this year from 5 per cent in 2016, and will return to its standard 10 per cent in 2018.
SAIC’s affiliated marques include MG, SAIC Volkswagen, SAIC-GM and Shanghai General Motors Wuling.
SAIC Volkswagen reported flat sales in the first six months, no thanks to the lacklustre performance of its new SUV models including the mid-priced Tiguan L, and the high-end Teramont that starts selling at 300,000 yuan.
The VW-branded SUVs lost out to rivals Guangzhou Automobile Group’s indigenous brand Trumpchi and home-grown SUV maker, Great Wall’s H6.
Tiguan recorded sales of 140,000 units in the six months to June, nearly 40 per cent shy of the sales for H6.
SAIC-GM reported year-on-year sales growth of four per cent during the first half.
However, SAIC’s own brands, including Roewe, reported a stunning 113 per cent sales jump, buoyed by strong sales of RX5.
Its new model, RX3, a compact SUV expected to sport a price tag of between 80,000 yuan and 11,000 yuan, will hit the market soon.
SAIC is the runaway front-runner on the mainland, which accounts for one out of five vehicles sold in the country.
Its own brand Roewe is collaborating with Alibaba to build internet-connected sport-utility vehicles.
The Roewe RX5 SUV features smart technologies from Alibaba’s YunOS operating system, which includes an intelligent digital map, smart voice control, action cameras and internet ID.
Alibaba is the owner of the South China Morning Post.
Earlier this year, SAIC said it would put off its plans to export vehicles to the United States due to policy uncertainties.
In June, the company announced it would bring its MG brand to India with plans to start production in the South Asian country in 2019. It will become the first Chinese automaker to set up a plant in the India.
Industrial Securities estimated in a research report that SAIC’s full-year profits in 2017 would hit 3.12 yuan per share, boosted by the introduction of several new models.
The first-half profit represented 44 per cent of the projected whole-year earnings by the brokerage.
SAIC’s A shares dropped 1.2 per cent to 29.85 yuan on Wednesday. They climbed 37 per cent so far this year.