China's Feb auto sales rise, but pace slows

Auto sales continued to rise in China in February, though at roughly half the rate of previous months, data from a semiofficial industry organization showed Tuesday.

Last month's sales growth of 46.3% to 1.21 million units suggests that while government incentives continue to boost demand, the sales pace is moderating and may eventually be in line with industry observers' expectations of 10% to 15% growth for the full year.

Analysts have said the true test for China's auto sector may come next month. Supportive policies that were introduced at the beginning of last year started to kick in during March 2009 and should therefore begin to have a moderating comparison-base effect on auto-sales growth beginning next month.

The Lunar New Year holiday, which fell during February this year, likely contributed to slower sales growth last month. Though consumers buy more vehicles in the lead-up to the holiday, sales slow during the weeklong break, which was in January last year.

February's sales were a marked slowdown from January, when sales more than doubled from a year earlier to 1.66 million units, according to the China Association of Automobile Manufacturers. Sales in November and December rose more than 90% each month.

Taken together, auto sales in January and February rose 83.8% from a year earlier to 2.88 million.

China remains a bright spot for auto makers as they try to regain their footing in developed markets. China became the world's largest auto market last year, overtaking the U.S., which faced record sales drops amid the global financial crisis and the solvency problems of its top car makers.

China successfully reversed plummeting sales in its auto sector with policy measures introduced in January last year that included a purchase-tax cut on vehicles with 1.6 liter engines and smaller, and subsidies to encourage vehicle purchases in rural areas and of less-polluting vehicles.

The policies continued this year with some modifications. The purchase tax cut was partially reinstated to 7.5%—still lower than the normal 10% level—and the subsidy amount for trade-ins was raised.

Zeng Qinghong, the president of Guangzhou Automobile Group Co., China's sixth-biggest auto maker by sales volume, said Monday he expects his company's sales to grow about 15% this year, in line with his expectations for overall growth in China's auto industry this year.

Sales in China last year rose 46.2% to 13.6 million units, according to CAAM. Sales growth in the second half of last year was especially strong.