The future of China's automobile industry is unfolding on the packed elevated highways of this nation's commercial capital, as smaller cars from newcomers are nudging aside larger old stalwarts.
Though the boxy Volkswagen Santanas that fill Shanghai's taxi fleet still outnumber the Hyundai Elantras and perky Chery QQs, it's these later, smaller arrivals that are lifting profits while others' languish.
China's car market is in a slump so far this year, with overall vehicle sales in the first quarter down 7.7 percent from a year ago as the government tightened credit policies and companies reduced purchases amid spending cutbacks.
But smaller, cheaper models are selling well, thanks largely to restrictions on lending for auto purchases, part of a nationwide credit tightening, analysts say.
The top three models sold in March were all compacts or mini-cars, according to the China Automobile Manufacturers Association: South Korean carmaker Hyundai Motor Co's Elantra, Tianjin FAW Xiali Automobile Co's (
"They have pretty suitable small cars at reasonable prices," said Yale Zhang, an auto market specialist for consulting firm CSM Asia Corp.
The slowdown has hurt several major Chinese automakers, who reported lower first-quarter earnings this past week amid price cuts and slower sales that have taken some of the gloss off the world's fastest growing car market.
State-owned FAW Car Co (
FAW is the biggest shareholder in Tianjin FAW Xiali Automobile, which reported a first-quarter net loss of 32.1 million yuan, despite the popularity of its oddly-named TJ7101U, an angular hatchback. It blamed higher costs and pricing pressures.
Chongqing Changan Automobile Co (
In results reported earlier, Brilliance China Automotive Holdings Ltd (
Early bird Volkswagen AG, which launched a joint venture with Shanghai Automotive Industry Corp (
VW's profits in China fell to US$289 million last year from euro561 million a year earlier.
For the year, sales are forecast to rise 10 percent on-year, compared with 75 percent growth in 2003 and 15 percent last year.
Beijing Hyundai Motor Co (
Geely, which makes compact hatchbacks like the Merrie and Haoqing, reported first quarter sales of about 30,000 cars, in line with plans for 24 percent sales growth this year to 120,000 units.
The company, whose shares are traded in Hong Kong, said its net profit rose by 47 percent on-year to US$10.8 million last year, helped by fast sales of its Haoqing model cars.
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