Spring has come to revive China car market?

Shanghai, March 11 (Gasgoo.com) Spring seems to have come to revive the Chinese auto market. China vehicle sales surged 25% from a year earlier in February, the first gain in four months, after the government cut taxes on some models and released other stimulus measures to boost the market demand.

China's auto sales totaled 827,600 units last month, up 12% from the 735,000 sold in January, the China Association of Automobile Manufacturers (CAAM) said earlier this week. Passenger cars accounted for 607,300 of the total. And passenger cars with engines under 1.6 liters accounted for 70% of the passenger vehicle market, so the bounce of small-engine cars played a critical role in the revival.

The figures from the industry association CAAM appeared to show that China extended its lead as the world's largest market in the second straight month this year. However, China's claim on the top spot was due also in part to plummeting US auto sales amid the economic crisis, with US light vehicle sales coming in at 688,909 units in February, according to industry tracker Autodata.

"The February sales figure is very impressive. It seems that the new incentives are really having an impact on the market," said an industry analyst with Changjiang Securities. The policies introduced at the start of the year, including the scrapping of some road fees and halving of sales taxes on small vehicles, have increased the number of buyers to showrooms nationwide.

Earlier this year, China slashed the sales tax on small-engine passenger cars from 10% to 5%, seeking to boost sales of fuel-efficient vehicles, especially in the countryside. The government has also offered five billion yuan ($731 million) to farmers buying minivans and sub-1.3-litre minibuses until the end of 2009.

In addition to the government tax cuts and other incentives, there are two other major factors behind the auto sales growth in February: Production cut by automakers caused the nation's stockpile of unsold vehicles to fall to the lowest in two years last month. The week-long Chinese New Year holiday (or "Spring Festival") break was in late January this year, and thus gave auto dealers more working days in February than last year that had the holiday in early February. 

"The forecast is that the situation in March will be even better than February," the state-run newspaper Shanghai Securities News quoted a senior association official as saying. "Consumers are regaining confidence because of the government's stimulus policies," said an analyst at Daiwa Research Institute in Shanghai.

However, some analysts and industry executives remain cautious about the market's outlook, saying a single monthly figure was not evidence of a sustained pick-up in demand, as vehicle sales may fluctuate in the coming months." Still, automakers are heartened by the government's positive (and effective) measures and the February sales growth.

This month of the budding spring season should be more significant for Chinese car makers and dealer alike. The auto sales in March are usually seen as a reliable barometer of the whole-year auto market performance. "China's car market will grow 10% this year, if there is good growth of 5 to 10% in March," Nigel Harris, Ford Motor's chief of sales and market in China, told the media this week.

China's top 10 passenger carmakers by February sales are Shanghai VW, FAW VW, Shanghai GM, Beijing Hyundai, Chery Auto, FAW Toyota, Dongfeng Nissan, BYD, Geely, and Changan Ford. Shanghai-based SAIC Motor, a partner of General Motors and Volkswagen, led the market with 169,500 vehicles sold last month, followed by FAW Group with 114,100 units sold.