Geely Automobile Holdings Ltd reported its 2010 net profit increased by 16 percent though annual sales growth lagged behind industry average.

Net income rose to 1.37 billion yuan (US$209 million) last year, up from 1.18 billion in 2009, Geely said in a statement filed with the Hong Kong stock exchange yesterday. Its revenue rose 43 percent year on year to 20 billion yuan.

The listed unit of China's largest private car maker, Zhejiang Geely Holding Group Co, attributed the profit growth to higher sales income and more market demand for its higher-end product mix.

Last year, Zhejiang-based Geely boosted sales by 27 percent to 415,843 units, underperforming from the 32 percent industrial growth. The fallout also drove Geely out of the top 10 biggest car makers in China last year.

Geely was among auto makers that reported slower sales last year after China scaled back a purchase tax on small cars. Risks for further slowdown mounted this year after the expiration of such a tax.

Geely's sales rose 6.7 percent in the first two months, falling short of the 10-percent expectation for industrial passenger car growth.

Chen Huanyu, analyst with Guotai Junan Securities, said the policy change had a more-than-expected impact on Geely.

"In addition, the newly introduced sales quota in Beijing will prompt car makers to opt for higher-end models. We are lowering our sales growth forecast for Geely from 13 percent to 10 percent this year," he said in a note.

Other analysts estimated the purchase of Volvo Car Corp may help Geely to reshape its brand image and benefit from technology upgrades in the long run.