Chinese auto industry prospects in 2009

After years of double-digit growth, car sales in China slowed significantly last year, particularly in the second half. With a weakening economy curbing demand in the world's second largest auto market, the key question is what we can expect for the year ahead.

As 2008 began ambitious auto makers in China set an annual sales target at 10 million cars. But in September dark clouds from the the US financial storm appeared on the horizon in China. The last four months of 2008 saw four consecutive monthly declines. Vehicle sales fell short of the auto makers target for the year.

This has not escaped the government's attention. When Premier Wen Jiabao visited eastern province of Shangdong at the beginning of the year, he suggested the auto industry was among the key sectors to be promoted. Its great importance in the national economy would help to boost domestic demand. Experts say promotion would help the auto industry regain its footing.

Jia Xinguang, chief analyst of Beijing Auto Ind. Development Research Ctr., said, "The auto market will probably remain in a downturn in the first half of 2009 as the influence of the financial crisis lasts, and car buyers will wait for better bargains. But in the second half, the market will come back with the government policies taking effect."

The auto industry expects the State Council to unveil a number of initiatives in the first quarter of 2009, such as cutting the sales tax on vehicles and incentives to build more fuel-efficient vehicles.

Other measures are thought to include encouraging further consolidation in the industry, while government bodies could also be mandated to buy domestic vehicles in fleet purchases.

That may be why Chinese car maker Geely has confidently set its 2009 sales target at 300 thousand units, 25 percent above 2008.

Foreign car makers are also looking at the Chinese market positively. Mercedes-Benz expects the market for cars in China to grow from six to ten percent in 2009, increasing sales of their luxury cars.