Lizhong Wheel shifts into higher gear as China car demand races ahead

Lizhong Wheel Group Ltd has shifted production into higher gear as China's demand for cars cruises along even in the face of higher fuel prices.

Zang Ligen, the company's executive chairman, said the Chinese aluminum wheel manufacturer expects second quarter revenues to top first quarter levels as a result of its initial output at the company's plant in Tianjin in north China.

Singapore-listed Lizhong previously reported first quarter net profit rose 42.3 pct from a year earlier to 35.2 mln yuan, helped by increased production capacity and strong demand for passenger vehicles in China. Revenue rose 12 pct to 236.1 mln yuan.

The Tianjin plant will cost a total of 780 mln yuan for its three phases with the final phases brought on line in 2009 and 2010.

Lizhong, based in Baoding in north China's Hebei province, sells three-fourths of its output to the domestic market. All of its products are destined for the auto sector, both at home and overseas.

The company's biggest customer is Toyota, supplying the Japanese automaker's Chinese plants indirectly. About 80 pct of all new China-made automobiles from Toyota come equipped with Lizhong wheels.

The company has two plants in Hebei and a plant in Huolinguole in Inner Mongolia as well as the new plant in Tianjin.

Rising fuel costs are slowing growth in the domestic auto sector overall, however.

In the first half of this year, total domestic car output reached 5.2 mln units, up 16.71 pct over last year, according to the China Association of Automobile Manufacturers. That rate of growth -- while still quite strong -- was down from the 22.36 pct in the same period last year.

So far, Lizhong Wheel has seen no orderbook slump due to slower domestic auto sales or ongoing economic troubles in major export markets, Zang said.

But he did concede that Olympic-related traffic restrictions and high oil prices are both downside risks for car sales and driving in general in China over the next few months.

The company does not anticipate much negative impact from a global economic slowdown. On the contrary, the company may actually increase exports even in the current difficult export climate, Zang said.

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