(emphasis mine) [my comment]

Auto sales 'surpassed US in Jan'
[ 2009-02-06 11:29 ]

China may have [has] surpassed the United States to become the world's largest auto market based on monthly sales in January, according to analysts and forecasts.

General Motors, the leading US automaker, estimates that China sold about 790,000 vehicles last month.

While car sales in China have slowed lately, they haven't plummeted like in the US, where January sales tumbled 37 percent from a year ago to 656,976 vehicles - a 26-year low.

"This is the first time in history that China has passed the United States in monthly sales," Mike DiGiovanni, General Motors' executive director of global markets and industry analysis, said in a conference call late Tuesday.

DiGiovanni projects that Chinese auto sales could hit 10.7 million vehicles this year, nearly a million units more than his estimate of 9.8 million unit sales in the US for the same period.

The official Chinese car sales figures are yet to be published, but analysts say the GM estimate is close to de facto sales.

"Although it is too early to conclude based on the monthly figure that China has become the world's largest auto market, it is definitely the world's only major auto market with strong potential," said Yale Zhang, a Shanghai-based auto analyst.

China outpaced Japan to become the world's No 2 vehicle market in 2006. Although auto sales have slowed in recent months, analysts say China has great growth potential in the long term given strong domestic demand and recent government policies.

The government passed a stimulus package for the auto sector last month, reducing the purchase tax on vehicles with an engine capacity of less than 1.6 liters by half to 5 percent.

It is also spending 5 billion yuan ($730 million) on subsidies to farmers replacing three-wheeled vehicles or outdated trucks with small, 1.3-liter or less, vehicles.

The push is to promote more energy efficient vehicles while improving the competitiveness of the country's highly fragmented auto industry. About 10 billion yuan is going into upgrading automakers' technology and developing alternative energy vehicles.

"The purchase tax cut is the most effective tool the Chinese government has adopted for market recovery," said Ricon Xia, auto analyst at Daiwa Securities. The tax adjustment is expected to boost auto sales in China this year by 3-6 percent, he said.

Auto News asks if Spring has come to revive China car market?

Spring has come to revive China car market?
By George Gao From:Gasgoo.com March 11, 2009

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.

Istockanalyst reports that Shanghai GM sales exceed 117,000 units in Q1.

Shanghai GM sales exceed 117,000 units in Q1
Tuesday, April 07, 2009 4:05 AM

Apr. 7, 2009 (Xinhua News Agency) -- Shanghai GM sales exceed 117,000 units in Q1

BEIJING, April 7 (Xinhua) Shanghai GM, a joint venture between U.S.-based General Motors (NYSE:GM) and China's Shanghai Automotive Industry Corporation (SAIC), sold more than 117,000 vehicles in the first quarter this year, up 12.9 percent from the previous quarter.

The company's Buick brand car led the growth, with March sales hitting 32,362 units, holding 70 percent of the joint venture's total sales for the month.

China Daily reports that automakers shift into high gear.

Automakers shift into high gear
By Li Fangfang (China Daily)
Updated: 2009-02-09 07:59


Chinese BYD Auto displays its F3DM model at the North American International Auto Show last month in Detroit. [Xinhua]

Automobile companies are shifting into high gear and driving into the revved up car market in China in a bid to escape the financial tsunami that has knocked the wind out of the sails of the industry.

What makes the drive to China even more irresistible is the recent stimulus moves announced by the government to bolster new purchases, coming at a time when the markets of the yonder seem to be drying up.

The stimulus package is expected to boost auto sales both in big cities and rural regions, especially for small cars and farming vehicles. The moves will add 300,000 units to market demand this year and also help in the upgrade, reshuffle and integration of the entire industry. Special emphasis has also been laid on developing green energy technology as a long-term consideration.

Purchase tax on vehicles with engines of less than 1.6 liters has been halved and exchange of old vehicles for new ones with smaller engines subsidized. The purchase tax adjustment, from 10 percent to 5 percent, came into effect from Jan 20. A sum of 5 billion yuan has been set aside as subsidy for farmers.

Statistics from China Association of Automobile Manufacturers (CAAM) show that in 2008, cars with engines of less than 1.6 liters sold across the country account for 60 percent of the total sedan market, with volumes of over 3.1 million units.
…
"China's auto market is set to pick up in the second half of this year and continue its steady progress in the future," said Yale Zhang, director, Greater China Vehicle Forecasts for US consultancy CSM Worldwide Corp. He expects the market to grow at 6 percent this year and maintain a healthy growth rate of around 10 percent starting from 2010.

He added that the measures would also help the country come close to the annual sales target of 10 million units set by CAAM last year. In 2008, automobile sales in China increased slightly by 6.7 percent from the previous year, the lowest in the past decade, according to CAAM.

My reaction: Auto sales show the diverging fortunes between the US and China.

1) China surpassed the United States to become the world's largest auto market based on monthly sales in January

2) While car sales in China did slow, they didn’t plummeted like in the US, where January sales tumbled 37 percent from a year ago to 656,976 vehicles (a 26-year low).

"This is the first time in history that China has passed the United States in monthly sales,"

3) China has great growth potential given recent government policies to support its auto market:

A) Reducing the purchase tax on vehicles with an engine capacity of less than 1.6 liters by half to 5 percent.
B) Spending 5 billion yuan ($730 million) on subsidies to farmers replacing three-wheeled vehicles or outdated trucks with small, 1.3-liter or less, vehicles.
C) About 10 billion yuan is going into upgrading automakers' technology and developing alternative energy vehicles.

4) China vehicle sales surged 25% from a year earlier in February, the first gain in four months (auto sales totaled 827,600, up 12% from the 735,000 sold in January)

"The February sales figure is very impressive. It seems that the new incentives are really having an impact on the market,"

5) China extended its lead as the world's largest market for the second straight month.

6) China's claim on the top spot was also due to plummeting US auto sales, with US light vehicle sales coming in at 688,909 units in February.

7) Production cut by automakers caused China’s stockpile of unsold vehicles to fall to the lowest in two years in February.

"The forecast is that the situation in March will be even better than February,"

"Consumers are regaining confidence because of the government's stimulus policies,"

8) Shanghai GM sold more than 117,000 vehicles in the first quarter this year, up 12.9 percent from the previous quarter.

9) Automobile companies are shifting into high gear and driving into the revved up car market in China in a bid to escape the plunging sales in US and other nations hit by financial crisis.

"China's auto market is set to pick up in the second half of this year and continue its steady progress in the future,"


Conclusion: Three months ago, I wrote about the US auto industry suffering while Chinese auto industry prospers. At that time, I observed that “the comparison between the US auto industry and Chinese auto industry offers a stark contrast.” That comment hold true today.

As China continues to recover, Chinese demand will begin to push up inflation, which in turn will eventually lead to China dropping its dollar peg.