The Wall Street Journal (Beijing) - China's main auto-industry group reduced its annual sales-growth estimate for the second time this year.
The China Association of Automobile Manufacturers said Thursday that overall auto sales in the world's largest auto market are expected to show growth of no more than 3% this year, down from a previous forecast of about 5%. That pales in comparison to the group's initial estimate of 10% to 15% growth.
For the rest of the year, "it would be good" if auto sales could match last year's level, said Xiong Chuanlin, the association's vice secretary.
Despite the weaker forecast, a 3% rise would represent sales of about 18.6 million vehicles, which would still cement China's status as the world's No. 1 car market. New-car sales in the U.S. totaled about 11.6 million vehicles last year.
China's auto industry has been hit by slower economic growth and the government's shift from encouraging people to buy cars. In the face of the 2008 financial crisis, Beijing enacted a massive economic stimulus program that included subsidies for new-car purchases—a major reason that growth in vehicle sales jumped from 6.7% in 2008 to 46% and 32% in 2009 and 2010, respectively, the association said.
But economic growth has become less of priority for the government, which is concerned about rapid inflation. As part of that shift, Beijing has reduced subsidies. As a result, auto makers face tough comparisons with a year earlier, as well as sated demand.
Much of the toll has been felt by local manufacturers. General Motors Co. said Monday that its vehicle sales in China, along with those of its local joint-venture partners, rose 15% last month from a year earlier to the second-highest monthly sales total ever. Sales rose 6.6% for the year through September, to 1.9 million vehicles.
Toyota Motor Corp.'s vehicle sales in China rose nearly 11% last month to around 86,400 vehicles. The increase reflected a continued recovery from disruptions related to Japan's earthquake and tsunami in March, which disrupted industry supply chains. Toyota's sales rose 15% in August and 28% in July.
Some elements of the high-end of the market have shown signs of a slowdown. Daimler AG's Mercedes-Benz brand posted a 13% rise in September sales, down from nearly 60% during the first half.
The market for small cars—an affordable option for Chinese households still climbing the economic ladder—is likely to be most affected by the change in Beijing's economic policy. The association said sales of passenger vehicles in China rose 8.8% last year from a year earlier to 1.3 million vehicles, partly because of higher sales of small-engine cars. China will tighten requirements for remaining subsidies for those vehicles beginning next month.
Strong September sales are "more like advance purchases," said Mr. Xiong, of the auto association.
He said demand remains robust despite the lower subsidies. Passenger-vehicle sales for January through September rose 6.4% from a year ago to 10.5 million vehicles.
BYD Co., a Chinese battery and car maker, sold 38,000 vehicles last month, about 15% more than a year earlier, according to a calculation by The Wall Street Journal. BYD posted auto sales of 33,100 vehicles in September of last year, according to the auto association.
Yale Zhang, an analyst with consulting firm Automotive Foresight (Shanghai) Co., said BYD's growth was aided by the success of newer models and enhanced promotional efforts. He said the company's new sport-utility vehicle could provide momentum to sales in the coming months as SUVs are popular with Chinese consumers.
BYD hasn't had a smooth ride this year. Net profit slid 89% in the first half, largely because of 23% drop in car sales. The company said it expected sales to remain slow in the second half amid weak consumer confidence.
