Geely is among the major Chinese carmakers that had an increase in profit margins last year. (Photo : Getty Images)
Thanks to large sales volumes and fresh lineup of products, China's car market has witnessed a giant leap in profit growth last year, China Daily reported.
According to the article, major car-making firms listed on the Hong Kong Stock Exchange and Chinese A-share market have had a massive rise in their respective profit margins.
These companies include the State-owned SAIC Motor, whose net profit increased 7.5 percent--the biggest jump among its competitors.
Now with net profit worth 32 billion yuan, SAIC Motor said that its growth can be attributed to its sales volume expansion last year. In 2016, the company produced 6.5 million more vehicles or an equivalent of 9.95 percent.
"SAIC had a very large base last year, so a single-digit growth in net profit is significant. Smaller ones, including Geely and Great Wall, find it easier to achieve much higher growth rates," said a senior automobile analyst who requested anonymity.
Joining SAIC in the list of top three firms that gained the most profit are Great Wall Motor and Chongqing Chang'an Automobile, an entity listed with State-owned China Chang'an Automobile Group. Collectively, the companies posted over 10 billion yuan.
According to industry insiders, the main drive behind this leap are the large sales volumes, citing the concept of economies of scale.
"The backbone is the volume. A carmaker's assets remain stable day to day, and the research and development investment has already been paid. So the more products they sell, the more they earn," the analyst told China Daily.
Meanwhile, Geely Automobile Holdings, another carmaker, posted a more-than-double year-on-year increase with its 4.5 billion yuan statistic.
Apart from sales volumes, the industry's recent achievement can be traced back to "refreshed product line-ups."
Basing on the analyst's arguments, China Daily wrote that "the new products, especially the popular sport utility vehicles, are widely accepted for the latest technologies, trendy silhouette and designs." This has subsequently pushed up retail prices that resulted in higher profit margins.
Nonetheless, not all firms in China's car market experienced the same trend. Case in point is First Automotive Works Group Corp's FAW Car Co, the only major company that posted a profit deficit for 2016. Based on its report, the Jilin-based firm has tallied an 18 percent decrease.
