China car sales jump most since 2006 on stimulus

China's passenger-vehicle sales rose 47 percent in May, the biggest jump since February 2006, as tax cuts and government subsidies helped extend the country's lead over the U.S. as the world's biggest auto market this year.

Chinese drivers bought 829,100 cars, sport-utility vehicles and other passenger vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Overall vehicle sales rose 34 percent to 1.12 million.

China has cut retail taxes on vehicles and handed out subsidies in rural areas after auto sales slowed on the global economy and job concerns. The moves helped General Motors Corp., the largest overseas automaker in China, to boost sales in the country 34 percent in the first five months of the year even as plunging U.S. demand forced it into bankruptcy.

"Sales of small cars have been driving growth," said Ricon Xia, an analyst with Daiwa Institute of Research (H.K.) Ltd. in Shanghai. "Whether automakers can reverse profit declines this year will depend on demand for big cars and heavy- duty trucks that carry bigger profit margins."

Combined profit at the country's top 19 automakers fell 28 percent in the first four months, while revenue declined 11 percent, according to the association. During the period, five automakers boosted profit, 10 reported declines and the rest had losses, it added.

SAIC Motor Corp., China's biggest domestic automaker and GM's main partner in the country, may boost full-year vehicle sales to 2 million, Chairman Hu Maoyuan said in Shanghai today. That's an increase of about 9 percent from last year, based on figures in its annual report. The company, which also makes cars with Volkswagen AG, boosted sales 26 percent to more than 1 million in the first five months.

Industrywide China vehicle sales rose 14 percent to 4.96 million units in the first five months. By contrast, sales in the U.S. fell 37 percent to 3.95 million.

China's commercial-vehicle sales fell 1.6 percent in the first five months to 1.3 million, the association said. Government policies that were introduced to help truckmakers aren't sufficient and more measures are needed, it added.