SAIC profit falls as write-off erodes China GM sales

SAIC Motor Corp., China's largest domestic automaker, said first-half profit fell 26 percent after 1.18 billion yuan ($173 million) of write-offs eroded gains from surging sales of General Motors Co. and Volkswagen AG cars.

Net income declined to 1.45 billion yuan from 1.97 billion yuan, the Shanghai-based automaker said in a statement to the city's stock exchange today. Sales rose 6.9 percent to 61.6 billion yuan.

The automaker booked write-offs after Korean unit Ssangyong Motor Co. entered receivership on tumbling sales of sport- utility vehicles. The loss eroded the benefit of a 24 percent surge in vehicles sales caused by Chinese tax cuts, government subsidies and economic growth.

"Ssangyong has continually weighed on earnings," Yu Bing, an analyst at Ping An Securities Co. in Shanghai, said before the announcement. The domestic sales "momentum should continue in the second half," Yu said.

SAIC climbed 8.6 percent to 18.66 yuan in Shanghai trading before the announcement. The stock has more than tripled this year, compared with a 63 percent increase for the benchmark Shanghai Composite Index.

SAIC sold 1.23 million vehicles in the first half, giving it a 20 percent market share, the company said. Chairman Hu Maoyuan has said full-year sales may reach 2 million, up from 1.8 million last year.

Vehicle Sales

Overall Chinese vehicle sales rose 31 percent to 5.37 million in the first seven months of the year. The full-year tally may rise 20 percent to 11.5 million, SAIC said. China has surpassed the U.S. as the world's largest automobile market this year.

Ssangyong slumped to its seventh straight loss in the quarter ended June after protests by ex-workers paralyzed production. SAIC's takeover of domestic rival Nanjing Automobile Group Corp., the maker of MG Cars, also had "negative effects" on operating income in 2008, the company said in its annual report without elaboration. The automaker invested in the two automakers to reduce its reliance on GM and Volkswagen.

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