China Jan car sales up 116 pct on holiday spending

China's passenger car sales in January jumped 115.5 percent from a year earlier, the country's official industry association said on Tuesday, as car buyers packed showrooms before the Lunar New Year.

A total of 1.32 million passenger cars were sold last month in China, the world's largest auto market, compared with 610,600 units sold a year earlier and 1.1 million units sold in December 2009, the China Association of Automobile Manufacturers said.

"Demand remains strong in January as many people want to get a new car for themselves for their loved ones before the Chinese New Year," said Zhang Xin, an analyst with Guotai Junan Securities.

The week-long holiday, which starts on Feb. 14, is the biggest shopping season for the Chinese who would spend lavishly on items ranging from flat-screen TVs to the lastest digital gadgets.

But analysts noted robust January sales growth was somewhat distorted by a low comparative base a year earlier when car sales declined 7.76 percent on a slowing economy at that time.

Auto sales in China rebounded strongly since April 2009 making the country a major bright spot amid a global industry downturn thanks to Beijing's policy incentives, including a halving of sales tax for small cars to 5 percent and subsidies for buyers in rural areas.

To continue shoring up its auto industry, a major economic growth engine, the government expanded its subsidies for vehicle buyers in rural area at the beginning of 2010. The sales tax rate on small cars, however, was increased to 7.5 percent, but was still lower than the previous rate of 10 percent.

Analysts expect auto sales will return to a slower but more rational growth rate of roughly 10 percent in 2010 on continued policy support from the government even though the renewed tax incentives for small cars were not as aggressive as anticipated.

Industry executives, including Chen Hong, president of SAIC Motor Corp (600104.SS), China's biggest automaker, remains sanguine about the outlook for 2010, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows.

Overall vehicle sales, including buses and trucks as well as cars, totalled 1.66 million units in January, up 126.3 percent from 735,500 units a year earlier, official data showed.