Chinese Automaker JAC Sees Profits Skidding by 80% in First Three Quarters

Chinese carmaker Anhui Jianghuai Automobile Group Corp. predicts its profits will plunge 80% in the first nine months of this year due largely to smaller government subsidies on new-energy vehicles and poor sales of its passenger cars.

The company, known by the shorthand JAC Motors, issued a statement on Tuesday saying its net profit for January through September is expected to fall to 163.5 million yuan ($24.8 million) for the first nine months of this year, compared with 817.5 million yuan in the same period last year.

Among Chinese automakers, JAC ranked No. 9 in terms of vehicle sales in the first eight months of 2017, according to the China Association of Automobile Manufacturers.

The company, based in Hefei, central China’s Anhui province, had earlier reported a 40% year-on-year plunge in net profit to about 345 million yuan for the first half of this year. The latest statement means the company will report a net loss of about 181 million yuan for the third quarter.

The statement blamed the poor performance on a “slide of new energy subsidies and drop of passenger cars.”

JAC sold 161,400 passenger cars in the first nine months this year, down 40% from the same period last year, according to another report on JAC’s website.

It sold more than 8,000 new-energy vehicles in the third quarter, a considerable number given that it sold 9,400 over the first two quarters combined. But those sales couldn’t compensate for the hit from the government’s reduction of subsidies.

The government has been subsidizing new-energy vehicles for years, but the amounts have been falling in 2017. A battery-powered car that can travel 250 kilometers (155 miles) on one charge, for example, last year could get 50,000 yuan in central government subsidies. In many places, that same vehicle could qualify for a subsidy of equal value from local governments as well. This year, however, the central government subsidy for the same model has been lowered to 44,000 yuan, and a local government’s subsidy is not allowed to exceed 50% of that amount.

JAC is not the only automaker suffering from shrinking government subsidies.

Chinese bus-makers witnessed sweeping drops in profit in the first half of this year as sales of electric buses plummeted. Zhengzhou Yutong Group, China’s largest bus maker, reported a 35% drop in net profit in the first six months. Another bus-maker, Zhongtong Bus, reported a 79% profit plunge in the first half of 2017, year-on-year.

Contact reporter Wu Gang (gangwu@caixin.com)