Analysts say rebound in February vehicle sales unlikely to be trend

Updated: 2012-03-08 08:13

By Li Fangfang (China Daily)

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Analysts say rebound in February vehicle sales unlikely to be trend
The number of passenger vehicles sold in China increased by 22.3 percent in February from a year before, the greatest increase in 14 months.

Even so, analysts noted that the good news pertains to only one month and said it should not be taken as a sign that the market is once again booming.

The China Passenger Car Association said on Wednesday that February saw sales of 1.94 million cars, sport-utility vehicles, multi-purpose vehicles and minivans. That came as a contrast to the results from the four previous months, which had all shown decreases.

"The 21 working days that fell in February supported an increase in production and sales," said Rao Da, secretary-general of the association.

"But if we put together the sales that occurred in the first two months, then the figure has still declined by 1.4 percent from last year."

Rao said it's possible the sales figure for March will also show a decline, especially if gasoline prices in China hit a record high.

"China's vehicle sales won't go back to skyrocketing as they did in 2009 and 2010 and as the country's economy continues to make a soft landing," he said.

Rao predicted 19.8 million automobiles will be sold this year, which would be an increase of 7 percent from 2011. He said he expects 15.55 million of those to be passenger vehicles.

Vehicle sales in China increased at a much slower pace in 2011 than in recent years, going up by only 2.45 percent from 2010. That was the lowest rate seen in 13 years.

In 2009, the number of vehicles sold increased by 46 percent from the year before and, in 2010, it went up by 32 percent from 2009. In those years, China overtook the United States to become home to the most vehicle sales in the world.

Mu Qizheng, analyst with the broker dealer UBS Securities LLC, said in a research report this week that the largest vehicle market in the world will make a mild recovery in 2012, saying the number of automobiles sold during the year was expected to increase by 10.6 percent to 20.5 million.

"The effects of the withdrawal of stimulus policies have faded out after a year," Mu said. "Increases in individual earnings and decreases in vehicle prices will also support the market in the future. Moreover, the fact that owning a vehicle in China is still relatively uncommon will lead to market demand maintaining an average annual growth rate of 13 to 14 percent over the next three years."

He also said automakers' profits will continue to shrink in 2012, as increased production capacity will whittle away at earnings that have already been carved out by intense competition.

"Big price cuts are coming," he said. "And domestic and Japanese brands are losing their market shares to German, Korean and US automakers."

General Motors Co said on Tuesday that it sold 240,554 cars and trucks in February in China, setting a new record for the month in the country. Its sales figure increased in February by 30.4 percent year-on-year, which was the third-highest for any month in General Motors' history in China.

In January and February, the US automaker sold a record 487,208 cars and trucks in China, an increase of 7.7 percent from the same period last year.

Kevin Wale, GM president and managing director for China business, said earlier that he predicted that between 5 and 10 percent more automobiles will be sold in China in 2012 than last year.

Another US automaker, Ford Motors Co, said on Wednesday that its February sales in China had surged by 28 percent from a year earlier, rising to 40,978 units.