Analysts have highlighted that Chinese automakers delivered strong sales and earnings in the first half of the year, with expectations that this positive momentum will continue into the second half. While some mild price reductions were observed in the market during the first half, they did not resemble the intense price wars seen in 2004. Experts believe that even if a price war occurs later this year, it is likely to be relatively moderate, ensuring that manufacturers' profitability won't be significantly impacted by such activities. Su Guojian, head of China Research at Macquarie Securities, noted that most mainland automakers saw improved profitability compared to the same period last year, with stable or even enhanced profit margins. Strong sales growth contributed to higher revenues and earnings for many companies. He expects the overall industry-wide price cuts this year to remain within 3-5%, avoiding a repeat of the aggressive competition from 2004. Other analysts echoed Su's optimistic outlook on pricing, sales volume, and overall profitability. Kong Lei, a joint director at Fitch’s Asia Pacific Enterprise Rating Department, pointed out that auto makers are facing less pricing pressure now, allowing them to maintain stable profit margins and improve their bottom lines. CSM Asia Automotive analyst Zhang Yu noted that passenger vehicle sales in China rose by over 40% in the first half of the year—a significant growth rate. Over the past two years, car prices have dropped, while consumer incomes have increased. Analysts believe that more stable pricing in the second half could drive further demand growth. Domestic brands like Geely, Chery, and Brilliance are leveraging their cost advantages to challenge the dominance of joint-venture manufacturers. Zhang Yu expressed optimism about these smaller players, citing effective low-cost strategies and strong earnings performance, with Chery and Brilliance leading the way. In July alone, Chery sold 159,564 units, up 62% year-on-year; Geely sold 117,841 units, an increase of 55%; and Brilliance sold 92,200 units in the first half, up 57.7%. However, analysts also warned of potential risks, particularly if crude oil prices continue to rise. Higher oil prices could lead to increased production costs and reduced consumer demand for vehicles. Kong Lei of Fitch Asia Pacific anticipates that rising fuel costs may impact car sales, especially for large-displacement models, but government policies encouraging small-displacement cars could help offset this trend. Despite high international oil prices, gasoline prices in mainland China have remained largely unchanged. In March, the National Development and Reform Commission raised ex-factory prices for automobiles and diesel, and in May, retail prices for gasoline, diesel, and naphtha were increased. However, no further adjustments have been made since then. Analysts also expect that raw material prices, especially steel, will not rise sharply in the second half of the year. Steel prices actually declined slightly in the first half, helping manufacturers control costs. Kong Lei noted that the increase in raw material costs was less than expected, particularly for steel. He predicted that without a fierce price war, car demand in China could grow by 10-15% in the second half, resulting in around 4 million units sold. According to data from the China Association of Automobile Manufacturers, in the first seven months, total auto sales reached about 4 million units, up 24.29% year-on-year. Production increased by 26.77% to 4.13 million vehicles. In August, sales rose 26.06% to 528,100 units, with passenger car sales reaching 378,000 units—an increase of 29.21%. Commercial vehicle sales stood at 150,100, up 18.78%. In the first half of the year, the Chinese auto industry reported a net profit of 36.77 billion yuan, up 59.58% year-on-year. Volkswagen held the largest market share at 16%, followed by GM at 11%. In terms of sales rankings, Shanghai GM, Shanghai Volkswagen, and FAW-Volkswagen ranked top with sales of 183,900, 161,900, and 147,600 units respectively. Chery, Beijing Hyundai, FAW Court, FAW Xiali, Geely, Guangzhou Honda, and Dongfeng Citroen each sold over 100,000 units in the first half. Dongfeng Motor and FAW Xiali had the most impressive performance, driven by strong sales and cost-cutting measures. Dongfeng Motor earned 1.11 billion yuan in the first half, up 69% year-on-year; FAW Xiali's profit tripled year-on-year; and Changan Automobile grew by 48.2%. US General Motors and its Shanghai subsidiary sold a combined 453,832 units in the first half, up 47% year-on-year. Shanghai Automotive alone achieved a 49.1% year-on-year increase, selling 201,901 units.

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