China car sales rise in first two months of the year as economy recovers

The Wall Street Journal (Shanghai) - China's auto market started the year with a 15% sales increase, fueling hopes for a strong 2013 in the world's largest auto market after two consecutive years of modest growth.

Data from the semi-official China Association of Automobile Manufacturers showed Monday that vehicle sales totaled 3.39 million vehicles in the January-February period, up from 2.96 million in the year-earlier period. Sales of passenger cars were more robust, with a roughly 20% gain over the same period to 2.84 million vehicles, the association said.

"The data showed that China's passenger-car market is extending a recovery," said Wu Jinghui, a director at consulting firm AlixPartners in Beijing. Ms. Wu cited improved consumer confidence, pent-up demand and increased marketing and discounting by manufacturers.

John Zeng, a director at LMC Automotive in Shanghai, said the domestic passenger-vehicle market is regaining momentum it lost when Beijing withdrew subsidies for small, economical cars.

"A 10% gain is likely in the sales of passenger cars this year," said Mr. Zeng. Sales of passenger vehicles in China rose 5.4% and 6.9%, respectively, in 2011 and 2012.

Beijing-based Citic Securities 600030.SH-0.36% forecast that China's sales of sedans, sport-utility vehicles, multipurpose vehicles and microvans will rise 15% in March from a year earlier.

The auto-manufacturers group provided sales results for two months of 2013 to address seasonal distortions caused by the weeklong Lunar New Year holiday, which fell in February this year and in January in 2012.

All but Japanese manufacturers reported stronger sales for January and February. Among foreign car makers, German manufacturers held the largest market share, with 19.34%.

Japanese passenger-car sales held a 12.5% market share in the January-February period, according to the auto-manufacturers group, down from 16.4% in December. However, sales declines among Japanese motor-vehicle makers have been moderating, suggesting that the impact of a territorial dispute between the two countries is leveling off.

Nissan Motor Co. 7201.TO 3.22% said sales slid 14% in the first two months of this year, compared with a 24% decline in December and a 30% fall in November.

In spite of strong sales data for the January-February period, analysts cautioned there are some roadblocks to China's overall car industry returning to full-year double-digit growth.

"The sales growth remarks a good start, but it's not enough for us to revise up the target of 7% growth in the overall vehicle market," said Dong Yang, secretary general of the auto-manufacturers group.

Most concerns come from the commercial-vehicle side, analysts said, citing the Chinese government's continued crackdown on the property market as well as its renewed efforts to stem air pollution.

In response to recent quick rises in housing prices, China said on March 1 it will require higher down payments and mortgage rates as well as strict implementation of a 20% capital-gains tax from housing transactions.

The clamp will deal another big blow to makers of heavy-duty vehicles, which have been struggling with slower investment growth and declining profit margins.

According to a China International Capital Corp. estimate, real-estate investment typically contributes to 31% of the overall demand for heavy-duty trucks.

In the first two months of 2013, sales of commercial vehicles, including trucks and buses, fell 5% from the year-earlier period to 551,700 vehicles.