Chery lays off hundreds after sales decline

Car manufacturer Chery Automobile, formerly known as China's largest homegrown brand, dismissed hundreds of staff members after its sales in May suffered a big fall, the Securities Daily reported Monday.

Chery has 25,000 employees, so the hundreds of layoffs can be considered small-scale, said the report, citing Huang Huaqiong, assistant to the general manager of the company.

Analysts attributed the downsizing to the company's recent sluggish sales.

In May, Chery sold 31,100 vehicles, falling 35.1 percent from 48,000 units in the same period of 2012. During the five months through May, its sales dropped 15 percent year-on-year to 130,000.

Chery's domestic rivals, on the other hand, performed well. Great Wall, presently the largest domestic brand in terms of sales numbers, sold 62,000 units in May, a 20 percent growth year-on-year, and saw a rise of 34 percent year-on-year to 311,000 in the first five months of 2013.

To date, Chery has reported over 2 billion yuan ($3.25 billion) in losses over the past four years. In the first quarter, the company remained in the red, down a whopping 191 million yuan in operating profits.

Lacking a competitive edge, Chery's products struggle to stand out in a domestic market that has seen increasing competition from brands from other countries, including those from the US and South Korea, said Li Yuheng, senior researcher with Shenzhen-based market research firm CIConsulting.

Ten years ago, foreign brands were still mainly targeting the high-end segment, but now they are scaling down their models and lowering prices to win lower-tier markets as well, said Zhang Yu, managing director at consultancy Automotive Foresight (Shanghai) Co.

Chery is not performing well in the overseas market either. In the first quarter, the company exported 33,300 vehicles, a 3.1 percent fall year-on-year.

In response, the company has lowered its 2013 sales targets to 170,000 from 184,800 in 2012.