Chery and Great Wall enjoyed an October sales boost, but BYD and FAW struggle to remain competitive.
While a six percent increase in light vehicle sales throughout October brought welcome relief to many of China's national automakers who have struggled with increasing competition and low demand throughout the year. However, BYD Co and FAW Car Co continue to battle for for to maintain their place in the sector.
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FAW, a subsidiary of China FAW Group Corp, has forecast losses of 250 to 350 yuan ($40 million to $56 million) for the first three Quarters of 2012, compared to earnings of 754 million yuan ($121) in the same period last year. The state-owned enterprise blames a slowing economy, higher R&D costs and tougher competition for the losses. While the car-making unit of FAW Group is suffering, the Group continues to generate healthy profits from its joint venture with Volkswagen AG and Toyota Motor Corp.
Troubled electric vehicles makers BYD Co also announced that profits may fall by as much as 98% this year as expensive components, high R&D costs and dampened demand put pressure on the EV market. Net profit for the year ending December 31st is expected to range from between 28 million to 110 million yuan ($4 million to $18 million compared to profits of 1.4 billion yuan ($224 million) only a year ago.
UBS analysts Yankun Hou and Ming Xu expect the company's sales to rise by six percent next year as BYD introduces improvements to technology and quality. In 2009 and 2010, report Hou and Xu, BYD sold a “massive volume of low quality cars”, a problem which the new innovations should address. Nonetheless, the company's diversification into a number of different sectors, including batteries, solar panels and water purifiers, may continue to drag on profitability.