Brilliance, BMW's China Partner, to Post 2010 Profit on Luxury Car Demand

Brilliance China Automotive Holdings Ltd., the local partner of Bayerische Motoren Werke AG and Toyota Motor Corp., expects to return to profit this year as demand for luxury cars accelerates, Chairman Wu Xiaoan said.

Profit in the first half is “very promising,” Wu told reporters in Hong Kong after the company’s annual shareholder meeting today. The company had a 1.6 billion yuan ($234 million) net loss in 2009.

BMW is expanding its factory in the northeastern City of Shenyang and building a second facility for 560 million euros ($688 million), as rising appetite for luxury cars helped push auto sales in China past those in the U.S. last year. Brilliance makes Munich-based BMW’s 3 and 5 series sedans in China. The Chinese company’s minibus venture with Toyota, the world’s largest carmaker, has lasted for the past two decades.

“The demand for our luxury sedans is rising and we continue to gain market share,” Wu said. “We’re seeing a case where demand for some models is outpacing supply.”

Brilliance China rose 7.8 percent to HK$2.49 in Hong Kong during the market’s 12:30 p.m. trading break. The stock has risen 13.7 percent this year compared with a 9.6 percent decline in the benchmark Hang Seng Index.

Sedan Sales

The Chinese automaker’s sales of BMW sedans rose 77.3 percent in the first four months of the year to 22,000 units, Wu said. BMW sedan sales for 2010 may increase by 30 percent from a year ago, he said. The company sold 44,888 BMW sedans last year.

Brilliance China said sales of minibuses rose 28 percent to 33,800 units. The automaker, which has no plans to raise prices this year, expects to meet its target of selling 100,000 minibuses in 2010 and will also be introducing a new model in the second half of the year to boost sales, Wu said.

“We are expected to post profits this year,” Wu said. “With the growth in demand for the vehicles under our portfolio, we’re expecting promising earnings this year.”

Brilliance China’s annual production capacity for BMW sedans will rise to 200,000 by 2012, then eventually to 300,000, Wu said.

Capacity Expansion

Brilliance China expects to invest about 10 billion yuan over three to five years in building more BMWs, Wu said. The company doesn’t need to raise any capital from the markets in the short term, he said. The company will use cash and may borrow from local Chinese banks to meet any funding requirements, he said.

The automaker also “successfully” revamped its operations after selling the Zhonghua sedan unit to its parent, Wu said. Brilliance China in October agreed to sell the unit for at least 494.5 million yuan and completed the sale in December.

The weakening value of the euro is benefiting the company, which imports about 60 percent of its components, most of which are priced in that currency, Wu said. The company may also see lower costs should China allow its currency to appreciate against the U.S. dollar, he said.

“These are all positive developments for us,” Wu said. “A stronger yuan and a weaker euro will help lower our costs, and make extra income for us.”

The euro stood at $1.2297 as of 12:14 p.m. Hong Kong time. The 16-nation currency has weakened by 14.2 percent this year.

To contact the reporters on this story: Liza Lin in Singapore at Llin15@bloomberg.net; Wing-Gar Cheng in Hong Kong at wgcheng@bloomberg.net.

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