Bloomberg News

China Auto Group Cuts Forecast for 2011 Vehicle Sales Again

October 11, 2011

(Updates with analyst comment in fourth paragraph.)

Oct. 11 (Bloomberg) -- China’s auto manufacturing association cut its 2011 sales forecast for the second time in three months, saying today that deliveries are expected to grow less than 5 percent.

Sales will improve next year because there’s still “fundamental demand” for vehicles, Dong Yang, deputy head of the China Association of Automobile Manufacturers, said in an interview today. The forecast is down from the industry group’s July expectation of 5 percent growth.

The revised projection is less than half of the association’s estimates from January for sales growth of 10 percent to 15 percent, and follows a government move that month to end sales-tax breaks and rebates. Vehicle sales in China grew 32 percent in 2010.

The government’s earlier incentives brought forward purchases of light commercial vehicles, Namrita Chow, a Shanghai-based analyst with IHS Automotive, said by phone. Auto demand also waned as after Beijing introduced policies restricting car ownership to curb congestion, she said.

The new forecast reflects the association’s more realistic view of the market, Chow said. She expects light vehicle sales to grow 4.5 percent this year, with light commercial vehicle sales falling 8 percent.

Overall Growth Down

“The fall in light commercial vehicle sales brought down overall growth of the vehicle market this year,” she said.

SAIC Motor Corp., China’s largest carmaker, slid 1.3 percent to 14.99 yuan as of the 3 p.m. Shanghai time close of trading while FAW Car Co. dropped 2.3 percent. The benchmark Shanghai Composite Index rose 0.2 percent.

With auto sales of 18.06 million in 2010, China surpassed the U.S. as the world’s largest car market for the second straight year as rising affluence and government stimulus measures spurred buying.

In January, China raised a sales tax on vehicles with engines of 1.6 liters or smaller to 10 percent from 7.5 percent. Subsidies given for trade-in vehicles and to rural residents to buy vehicles were also phased out.

--Tian Ying, Liza Lin. Editors: Nicholas Wadhams, Chua Kong Ho

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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