LI, Tao @ Hong Kong

A Great Wall Motor car is displayed at an auto show in Beijing. Automakers outperformed the benchmark index Monday, backed by expectations that the sector will present a sound result. Nelson Ching / Bloomberg

But analysts warn of slowdown from Q2

Automakers outperformed the broad market Monday in the city on the back of a strong earnings forecast by Great Wall Motor. However, analysts remain cautious about the overall outlook for the sector as government policies are unlikely to support fast growth in car sales this year.

Great Wall Motor Co Ltd, China’s largest sport utility vehicle maker, expected its profit for 2010 to rise more than 50 percent from the previous year due to an increase in automobile sales, the company told the local bourse on Monday without elaborating.

A report released by Kim Eng research group on Monday said Great Wall’s positive profit alert was “in line with the market’s expectation mainly attributable to the increase in sales volume by around 73 percent of the group”. And according to Kim Eng’s preliminary statistics, for the first three weeks of 2011, Great Wall’s sales volume is expected to have grown by around 100 percent in January.

Great Wall Motor climbed 5.78 percent to close at HK$12.44 in Hong Kong trading Monday, which helped lead a sharp increase in the price of other locally-listed automotive stocks powered by strong car sales in January.

Also on Monday, Dongfeng Motor Group Co, one of the “top four” domestic automakers, said on its website that its auto sales reached 297,600 in January, up 25.9 percent from a year earlier.

Shares of Dongfeng surged 9.27 percent to settle at HK$14.62, while Brilliance China Automotive Holdings Ltd, the local partner of Bayerische Motoren Werke AG (BMW), was up 5.41 percent to close at HK$6.24.

Geely Auto and Guangzhou Automobile Group Co also rose 3.55 percent and 3.66 percent on the same day. The sector significantly outperformed the 1.28 percent gain of the city’s benchmark Hang Seng Index.

Brilliance said Monday that it is likely to post a profit for the year ended Dec 31 compared with a net loss for the previous fiscal year because of an increase in the sales of BMW sedans.

On Feb 11, Brilliance reported that the total sales by volume in January of its major product, the BMW-series cars, had reached 10,500 units – growth of 94 percent year-on-year and 14 percent month-on-month, according to the Kim Eng report.

As congestion control policies have so far failed to dampen the enthusiasm of car buyers, Brilliance management has set up an aggressive sales target of 100,000 units in the fiscal year of 2011, up 37 percent from last year.

“Sales data is likely to stay strong in the first few months this year,” said George Yin, Beijing-based analyst at Bocom International Holdings.

On Dec 23, Beijing’s authorities announced measures to limit new vehicle registrations to 240,000 units in 2011, down about 70 percent from last year’s numbers, in a bid to ease severe traffic jams.

Hong Kong-listed automakers were hit hard in the following trading session as the market worried whether other cities on the mainland would follow suit.

Yin said January sales data from some major automakers helped paper over some of the more pessimistic sentiment. However, he added that the strong sales figures are not likely to remain sustainable. Yin expects sales to slow down from the second quarter this year.

Mainland auto sales rose 32.4 percent to 18.06 million units in 2010, but the trend will slow to about 10 percent to 15 percent this year, due to factors including the termination of some government auto-purchase incentives, the China Association of Automobile Manufacturers said on Jan 10.

The nation overtook the US to become the world’s biggest car market in 2009, with sales surging 45 percent to 13.6 million vehicles.

China Daily

(HK Edition 02/15/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-02/15/content_12008628.htm