Changan Auto profit soars after Mazda tie-up

Chongqing Changan Automobile, which in February added Japan's Mazda Motor Corp to its car-making alliance with Ford Motor, said profit more than doubled in the first nine months on strong sales and earnings from the partnership.

Profit surged 146 per cent to 533.3 million yuan or 33 fen a share in the nine months ended September from 216.5 million yuan or 13 fen a share a year earlier.

Sales rose 36 per cent to 18.2 billion yuan from 13.4 billion yuan, according to a statement filed with the Shenzhen Stock Exchange.

Changan Auto, which is struggling to maintain growth at its commercial vehicle business, signed up with Mazda in a move to strengthen assets and boost passenger car sales before selling shares overseas.

No date for the sale and a proposed Hong Kong listing has been disclosed.

Changan Ford Mazda Automobile, half-owned by Changan Auto, more than doubled its sales in the first nine months to 87,930 vehicles from a year earlier, Ford said on October 10. The United States firm is Mazda's biggest shareholder.

The alliance, which has attracted more customers by adding three new models and cutting prices, this week had to recall 52,838 Focus cars due to fuel-pump insulation defects.

The recall, involving one of the company's new products, may cost about 29 million yuan, Changan Auto said in a separate statement yesterday.

Changan Ford Mazda Auto, which has a factory in Chongqing, is scheduled to open a plant in Nanjing next year that will increase capacity by 180,000 to 200,000 units and could boost revenue 60 to 80 per cent.

High operating costs may limit its profit contribution to the company, Shanghai Securities analyst Xie Shuguang said in a report.

At the same time, the poor performance of the commercial vehicles business could offset the gains from the Changan Ford Mazda partnership, Eugene Yeoh said in a Deutsche Bank report.

Changan Auto's minibus sales gained 5.8 per cent to 149,564 units in the first half, and its mini-truck business grew 0.7 per cent to 43,267. The alliance's passenger car sales surged 177 per cent to 59,584 units.