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SHANGHAI, April 28 (Reuters) - China's Tianjin FAW Xiali Automobile Co Ltd said on Monday it moved back into the black in the first quarter of 2003, when car output surged 94.6 percent year on year.
FAW Xiali, which has a strategic partnership with Japan's top automaker, Toyota Motor Corp , also reported a 2002 net loss of 790.37 million yuan versus a loss of 95.49 million yuan in 2001, sideswiped by an accelerating price war at home.
Based in the northern city of Tianjin, FAW Xiali, which makes the venerable Xiali sedan seen all over Beijing, said car output rose a steep 94.55 percent to 29,846, while sales leapt 87.84 percent to 27,523.
The company reported first quarter net earnings of 55.6 million yuan ($6.72 million) against a net loss of 31.39 million yuan in the same period last year.
"The company had to raise output to make up for price cuts of about 20 percent," said China Southern Securities auto analyst Xu Xiang.
The price cuts "were effective at stimulating market demand, but also put heavy pressure on the company to reduce costs", FAW Xiali said in a statement published on the Shenzhen stock exchange's Web site at www.cninfo.com.cn.
"In the first quarter of this year, our company experienced fundamental changes as we made use of good market conditions and enhanced our capacity and sales," it said.
The company's three 50-50 joint ventures with Toyota, including a car production line, all lost money last year, it said, due to a once-off writeoff of debt.
FAW Xiali's bottom line also came under pressure from an increase in spending aimed at promoting new products, it said.
But analysts said the company would perform better this year after dealing with that bad debt burden in 2002.
"It won't have to worry about that problem this year, when we'll see an improvement in its financial fundamentals," said Xu.
FAW Xiali said it would try to reverse losses this year by improving operations, slashing costs, increasing outsourcing, linking pay to performance and cutting bureaucracy.
It also welcomed the government's decision to scrap 30 percent of consumption taxes retroactively from 2000, because some products had achieved emissions standards.
Long term, FAW Xiali is poised to benefit from its parent First Automotive Works' strategic alliance with Toyota to tap the country's booming auto market -- which saw car sales break the one-million mark for the first time in 2002.
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 might form an important car production base for the two partners, analysts said.
Toyota, the world's third-biggest automaker, is a relative latecomer to the rapidly growing market in China, where Volkswagen AG , General Motors Corp and Honda Motor Co Ltd have been making cars for years. ($1=8.277 Yuan)