News Room - Business/Economics

Posted on 13 Jan 2009

Car sales slow in China Beijing to unveil auto stimulus package

Car sales growth in China, the world’s second largest auto market, slowed to a single digit rate last year for the first time in at least 10 years as consumer confidence waned with a slowing economy, spurring government steps to bolster demand.

 

Analysts said the outlook for this year remained bleak, although tax incentives and other measures may help to keep the market from shrinking, while some automakers such as the Japanese have been able to cushion the blow by introducing new models.

 

China’s passenger car sales in 2008 rose 7.27% to 6.76 million vehicles, while sales in December fell 7.99% to 584,600 units, marking a fourth monthly decline for the year, data from the China Association of Automobile Manufacturers showed yesterday.

 

“The auto industry has entered a brutal winter,” said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.

 

“There are no signs of recovery so far, but if the government’s auto stimulus package comes out soon, we will at least see positive growth for the full year.”

 

Beijing is expected to unveil an unprecedented policy package as early as this week aiming to ensure at least 10% sales growth for the industry, although some analysts said that could be difficult to achieve.

 

The policy kit, subject to approval by the State Council, or cabinet, will include a reduction or waiver of the 10% auto purchase tax, the official Shanghai Securities News has reported.

 

China, the world’s fastest growing major auto market, had posted three years in a row of car sales growth above 20% until slowing economic growth began to erode demand last year.

 

Last year’s slowdown in China was particularly marked at General Motors Corp, one of the country’s two top car sellers, hurt in part by an aging product lineup.

 

The automaker, which is counting on a bridge loan from the US government to stave off bankruptcy, sold 6.1% more cars in China in 2008, compared with 12.5% growth at Volkswagen AG, its leading rival in the country, which rolled out a new Skoda Fabia, Lavida and other models last year.

 

Ford Motor Co’s car venture in China reported a 5.9% decline in 2008 sales.