Tianjin FAW Xiali Automobile Co Ltd, the Chinese joint venture partner of Japan's Toyota Motor Corp, said its net profits plunged by 78.8 percent during the first half of this year as a result of an increase in costs and a decline in car prices.

The Shenzhen-listed car maker reported 74.9 million yuan (US$9 million) in net profits from January to June this year, down from 352.4 million yuan (US$42.6 million) a year earlier, FAW Xiali said.

Its earnings per share stood at 0.05 yuan (US$0.006) during the period, diving 78.8 percent.

The company's turnover rose by 16.3 percent year-on-year to 3.1 billion yuan (US$374.4 million) in the period.

FAW Xiali blamed the profit plunge mainly on growth in raw material prices, a stronger Japanese yen against the US dollar and a decline in car prices.

The company imports a lot of components from Japan as its main products Vizi, Vela and Xiali compacts are based on models of Toyota.

FAW Xiali launched a new compact Xiali N3 earlier this month.

The company cut prices of all of its products during the first half of this year to fight for a big slice in China's increasingly competitive compact segment.

Song Bingshen, an auto analyst with China Securities Co Ltd, said that FAW Xiali's profit collapse had also resulted from its dormant unit sales growth affected by China's macro-economic regulations, such as those on car loans from banks.

FAW Xiali said it sold 59,302 cars in the first six months of this year, a meagre growth of 6.1 percent from a year ago.

"Most domestically-listed vehicle producers performed worse in the period compared with last year because of an overall decline in sales growth," China Securities' Song said.

Total sales of Chinese-made vehicles grew by 20.6 percent year-on-year to 2.9 million units during the first seven months of the year. The growth rate was down from 34 percent last year.

The growth of passenger car sales in the first seven months plummeted to 27.1 percent from 75 percent last year.

"FAW Xiali as well as other car makers in China will perform better for the rest of this year than in the first half with expected small unit sales rebounding in coming months," Song said.

FAW Xiali, 50.98 percent owned by First Automotive Works Corp one of China's top vehicle producers runs a joint venture with Toyota to produce the Vios and Corolla compact sedans.

The venture will make Toyota's Crown luxury sedan during the first quarter of next year.

(China Daily August 25, 2004)