Bayerische Motoren Werke AG (BMW)’s Chinese partner reported full-year profits that missed analysts’ estimates as a slowing economy led to intensifying competition from Beijing to Shanghai.
Net income at Brilliance China Automotive Holdings Ltd. (1114) increased 27 percent to 2.3 billion yuan ($370 million), the company said in a statement to the Hong Kong stock exchange today. That compares with the 2.36 billion yuan average of 31 analyst estimates compiled by Bloomberg. Sales declined 8.2 percent to 5.92 billion yuan.
China’s economy grew 7.8 percent in 2012, the slowest in 13 years, prompting vehicle makers to step up incentives to lure consumers. Promotions escalated during the end of the year as dealers worked to reduce inventory, according to industry researcher IHS Automotive.
“During the year 2012, China’s automobile sector continued to show mild growth,” Wu Xiao’an, Brilliance’s chairman, said in the statement. “The years 2013 and 2014 will remain challenging for this business, and it is likely that the minibus operation will bring negative financial impact to the Group’s overall performance during those periods.”
Brilliance gained 0.2 percent to HK$10.26 in Hong Kong before the announcement, extending the company’s gains this year to 7.6 percent. The benchmark Hang Seng Index rose 0.7 percent today.
Brilliance, which assembles the 3- and 5-series sedans, said BMW deliveries increased 49 percent last year to 160,849 units. The automaker will sell an estimated 200,000 BMWs this year, said Wu.
BMW deliveries in China -- including vehicles shipped from Germany -- climbed 40 percent to 327,341 vehicles last year, while Volkswagen AG (VOW)’s Audi saw sales -- including in Hong Kong - - gain 30 percent to 405,838 units, according to the companies.
BMW has the largest and broadest dealer network, according to Morgan Stanley analysts led by Edoardo Spina. They estimated in a note last month that BMW had 343 dealerships in the country as of January, compared with Audi’s 295, indicating that BMW is reaching farther inland into China’s third- and fourth-tier cities, where cars can fetch higher prices because competition is less intense.
Wu said the company is investigating a report by the state broadcaster that named Brilliance among automakers whose locally made cars emitted pungent smells that caused some owners to show physical symptoms such as dizziness and swollen fingers.
Brilliance will open about 60 new dealerships this year, according to Senior Vice President Lisa Ng.
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