Chinese car companies issue profit warnings

Two of China’s largest automobile makers have issued profit warnings for the first half of the year.

Both Shanghai Automotive Company and Chongqing Changan Auto said that their first-half profits could fall by over 50 percent due to lower prices for their products, weaker demand, and higher prices for raw materials.

China requires companies to issue a report when it is believed that their profits will fall by more than 50 percent.

Demand slowed in the second half of 2004, after huge growth in 2002 and 2003, when the Chinese government attempted to slow economic growth by measures such as limitations on credit.

This slump, combined with added manufacturing capacity which led to price cuts, has resulted in lower profits.

So far this year, demand for vehicles has grown by only 4 percent.

Both companies will report first-half results in August.

Shanghai Automobile Company, the listed component of Shanghai Automotive Industry Corporation, is China’s biggest carmaker.

It is involved in joint ventures with both Volkswagen and General Motors. Changan, meanwhile, has a joint venture with Ford.

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