(Yicai) March 19 -- The stock price of Fuyao Glass Industry Group has been sliding since March 6, despite the country’s largest glass manufacturer delivering a strong performance in 2023, due to concerns in the market of flagging sales in the automotive industry.

Fuyao Glass’ share price [SHA: 600660] closed down 1.9 percent at CNY42.35 (USD5.90) a share today. The stock has lost nearly 10 percent of its value for the last two weeks.

Fuyao Glass' latest earnings report did little to allay market fears. The company clocked robust earnings last year thanks to an increase in its prices, the leveraging of economies of scale, as well as a drop in the cost of the raw material soda ash.

Fuyao Glass logged a 18.4 percent jump in net profit in 2023 from a year earlier to USD5.6 billion (USD780 million), according to the Fuqing-based firm’s latest earnings report. Its gross profit margin swelled to 36.5 percent in the fourth quarter, a widening of 3.7 percentage points from the previous year.

But there are concerns in the market that intense competition in the automotive sector could be transmitted to the components industry. Earlier this month a new round in China’s auto price war was sparked when several carmakers including BYD and Li Auto lowered their prices again to spur sales.

As competition heats up, there might be less demand for Fuyao Glass’ products and the firm might have to reduce its prices, company insiders said. Also, if competitors lower their prices or roll out alternative products, this might adversely impact Fuyao Glass’ sales and profit margins, it added.

Auto manufacturers mainly have bargaining power over component makers with a small customer base, a private equity investor in Guangzhou told Yicai. However, suppliers like Fuyao Glass and Contemporary Amperex Technology, which command over half the market, have significant bargaining power over carmakers.

"However, if industry demand shrinks significantly, then these giants might too have to consider lowering their prices along with the rest of the supply chain," the person said.

Editor: Kim Taylor