SHANGHAI -- China's FAW Xiali engineered a turnaround to race back into the black in the third quarter, buoyed by earnings from a showcase venture with Japan's Toyota Motor Corp., results posted on Thursday showed.
But it warned that price cuts in June and September -- a result of cut-throat competition in the world's fastest-growing major car market -- could continue to weigh on the bottom line.
Tianjin FAW Xiali Automobile Co. Ltd. made a net profit of 116.95 million yuan ($14.13 million) from July to September versus a loss of 176.09 million yuan in the year-earlier period, it said in a report.
"We managed to enhance competitiveness in the face of pressure from price cuts," said FAW Xiali, China's third-largest listed car maker by market capitalization, based in the northern port city of Tianjin.
"Those cuts will have negative impact on our company's earnings, but we'll strengthen cost control to offset the impact," said the firm, controlled by one of the top three Chinese vehicle makers, First Automotive Works.
"We forecast a continued rise in earnings," it added.
Much of that profit came from its 50 percent-owned manufacturing joint venture with Toyota which posted a net profit of 793.68 million yuan in the first nine months of 2003 on production of just 36,214 sedans, it said.
Toyota, the world's third-biggest auto maker, is a relative latecomer to a rapidly growing auto market where Volkswagen AG, General Motors and Honda Motor Co. Ltd. have been making cars for years.
Under a wide-ranging deal between FAW and Toyota, which signed a pact to make 300,000 to 400,000 cars by 2010, FAW Xiali would comprise a crucial production base for both partners.
In the first nine months, FAW Xiali posted a net profit of 469.37 million yuan compared with a net loss of 582.60 million yuan in the same period of 2002, as sales and output surged on the back of a boom on the domestic auto market.
FAW Xiali's car sales jumped 36.05 percent year on year to hit 83,984 units in the first three quarters, pushing turnover up 32.4 percent on year to 3.97 billion yuan.
Output surged 49.6 percent to 94,722 units, it said.