The car sector on the Chinese mainland is experiencing a dramatic decline in profits, due partly to price hikes for such raw materials as rolled steel and energy, a senior expert with China Automotive Industry Consulting and Development Co. said recently.

According to Jia Xinguang, chief analyst with the consulting company, the car sector realized 841.77 billion yuan (US$103.8 billion) in sales income as against an output value of 858.96 billion yuan (US$105.9 billion) in the first three quarters of this year, a growth of 7.18 percent and 5.67 percent, respectively, year-on-year.

However, its profits shrank 39.29 percent from the year-earlier level to 36.1 billion yuan (US$4.5 billion) over the nine-month period.

Jia said the drastic profit decline was due to big-margin drops in car prices since the second half of last year and continuous price hikes for raw materials for car production, including energy and steel.

Between January and September, the nation's major automotive industry group companies all reported a decline in profitability, ranging from 16.57 percent to 75.86 percent.

China produced 2.07 million motor vehicles, including 2.32 million cars last year, up 14.11 percent and 11.99 percent respectively from the previous year. In the first nine months of this year, car production amounted to 735,700, up 42.3 percent over a year earlier.

Investment bankers estimated that the car supply exceeded the demand by 11 percent in China last year, and that the rate would likely reach 23 percent this year.

(Xinhua News Agency December 7, 2005)