Despite overall growth in the Chinese automobile industry remaining steady last year, FAW Car performed worse than it did the previous year. According to a report appearing in the National Business Daily, the manufacturer's business returns last year totaled 32.65 billion yuan ($5.16b), 12.45 percent lower than in 2010. FAW Car's net profit, meanwhile, totaled 217 million yuan ($34.29m), dropping a full 88.34 percent from 2010.

Worth noting is that FAW Car's had a total net profit of 754 million yuan ($119.13m) in the first three quarters of the year, implying that the manufacturer ran a deficit 537 million yuan ($84.84m) in the fourth quarter alone. If converted into stocks, FAW Car lost 0.33 yuan ($0.0521) for every share.

In its performance report, FAW Car did not give a detailed explanation for its declining performance, stating only that: "The tightening of national banking and monetary policies, the phasing out of stimulatory economic policies, the increasing price of fuel and other factors have caused growth in the market for passenger automobiles to slow greatly, [affecting] the company's (FAW Car's) products. Due to fierce competition in the automobile market …, the company's sales prices have decreased. Simultaneous, appreciation of the Japanese yen, increasing cost of materials and other factors have given the company a lot of pressure. The combination of these factors has caused the company's profits to drop."

In reality, one can refer to FAW Car's sales to gain an understanding of its overall situation. Although FAW Car is one of the few manufacturers that doesn't voluntarily reveal its monthly sales, statistics from the China Association of Automobile Manufacturers (CAAM) show that its overall performance last year has been lackluster.

In a research report released late last month, UBS Securities changed the rating of FAW Car's stocks from 'neutral' to 'sell'. According to UBS, although the manufacturer made notable strides in the fourth quarter by introducing progressive marketing policies, consumers continued to remain unreceptive. CAAM statistics show that FAW Car sold 52,962 vehicles in the fourth quarter, a year-on-year decrease of 31.5 percent. The manufacturer's flagship models, the Mazda6 first and second generation (Ruiyi) variants, managed sales of 22,335 (20.6% lower than 2010 Q4) and 6,001 units (58.7% lower) respectively.

Also worth noting is that FAW Car's second production site finally began operation at the end of 2010. The increased production capacity combined with decreased sales were extremely detrimental the manufacturer's performance last year.

Despite all of this, FAW Car's stock price has increased nearly 50 percent since last December 15, when it was valued at 7.74 yuan ($1.223).

Source:gasgoo