China car-sales in May rise 25% to 885,800 units

China's passenger-car sales growth slowed in May as falling stock prices eroded wealth and consumer prices rose in the world's largest automobile market.

Sales of cars, sport-utility vehicles and multipurpose vehicles rose 25 percent from a year earlier to 885,800 last month, the China Automotive Technology & Research Center said in an e-mailed statement today. That compares with 34 percent growth in April, according to the center.

The Shanghai Composite Index fell 9.7 percent in May as Chinese stocks remained among Asia's worst performing this year. A "diminishing wealth effect" along with high gasoline prices may contribute to a slowdown in auto sales, Credit Suisse Group AG analysts Adrian Chan and Hung Bin Toh wrote in a report last week. Vehicle sales could decline from year-earlier levels in the second half of 2010, they said.

"China had a sharp and noticeable ramp-up of sales last year, and it's impossible to imagine the country maintaining the same type of growth momentum," said Bill Russo, a Beijing-based senior adviser at Booz & Co., which advises automakers and investors. Russo said he expects demand growth to level out toward the end of the year.

China's target of keeping inflation under 3 percent this year "will be a difficult task" because of rising prices for bulk commodities including oil and disruptions to some agricultural production, Yao Jingyuan, chief economist at the China statistics bureau, said May 28.

Tax Cut

China's passenger-car sales have risen every month since February 2009 after the government halved the consumption tax on small vehicles to 5 percent the preceding month, according to separate data from the China Association of Automobile Manufacturers. The tax was increased to 7.5 percent this year.

Monthly passenger-car sales growth slowed in April to the most sluggish pace since March 2009, according to the manufacturers association, as China's consumer prices rose 2.8 percent from a year earlier.