Chongqing Changan Automobile Co Ltd, Ford's major partner in China, Thursday reported a 74 percent year-on-year rise in net profit last year, down from a 421 percent increase in 2002. The decrease was due to strong competition and rising rubber and steel prices.

Chongqing Changan, 57.77 percent owned by China's forth-largest vehicle maker Changan Automobile (Group) Liability Corp, reported 1.45 billion yuan (US$175 million) of net profit after selling 385,498 vehicles last year.

Gu Qing, a Haitong Securities analyst, said that automakers in China this year may see profit growth rates slow because of the large statistical basis in recent years after companies have finished expansion.

According to Chongqing Changan's statement, the company aims to sell 530,000 vehicles this year, including 25,000 units of Fiesta and 40,000 Mondeo units in its 50-50 joint venture with Ford.

The Shenzhen-listed Chongqing Changan also said in the statement that it plans to issue up to 15 million A shares to raise 1.1 billion yuan. The issuing is still awaiting regulatory approval.

Chongqing Changan plans to use 695.1 million yuan of that capital for 13 projects and expand its mini-van business in China.

Nearly 200 million yuan will be used for CM8, a multiple-purpose vehicle designed solely by Chongqing Changan. The company said that it will focus on improving its research and development center and dedicate itself to manufacturing vehicles with its own designs. It believes this will lead to further growth in the future.

The largest minivan maker in China said one of the difficulties it faces is that the sector showed slower growth compared with the auto segment due to lack of encouragement policies and limited use in many cities.

Minivan sales in China rose 7.05 percent year-on-year in 2003, while sedan sales surged 75.28 percent, the company pointed out.

Rising steel and rubber prices also put pressure on the company, which saw its steel purchase cost rise 15 percent last year from the previous period.

Facing keen competition in the domestic market, the company said it will enhance cooperation with its two foreign partners, Ford and Suzuki.

Chongqing Changan and Ford will build another production plant in Nanjing, capital of Jiangsu Province. Ford said that it will invest US$1 billion in China in coming years.

(Eastday.com March 19, 2004)