GAC Changfeng Motor, formerly known as Hunan Changfeng Motor, released its profit forecast for 2009 recently.
The automaker estimated a 50 per cent decrease in net profits in 2009 from net profits of RMB140 million in 2008. GAC Changfeng Motor said the decline was mainly due to increased expenditures on promotion and advertising activities as a result of the launch of its new product Liebao CS7.
In addition, the sales volume of more profitable products dropped, resulting in a lower gross profit margin. Last but not the least, less government subsidies also contributed to the decline in net profits.
Up to 658,800 SUVs were sold in China in 2009, representing a year over year growth of 47.2 per cent. However, GAC Changfeng Motor reported SUV sales of only 30,800 units in 2009, a year over year growth of less than 15 per cent. As a result, the carmaker’s market share in China’s SUV market shrank.
GAC Changfeng Motor’s profitability was also dragged down by low capacity utilization. The company expects to produce and sell 46,000 SUVs in 2010, well below its production capacity of 50,000 units each for the Liebao and Pajero series.