Chinese Auto Sales Surge Ahead

Beijing's policies to support China's auto market drove sales up 34% in May, according to data issued Tuesday by a semi-official industry group, as the country remained a standout in the struggling global car industry.Auto sales last month totaled 1.12 million units, the China Association of Automobile Manufacturers said. In contrast, U.S. car sales fell 34% in May to 925,824 units."Based on the current momentum, sales this year will easily reach 10 million units," said Global Insight analyst John Zeng. "For this year, there is no question about growth."China's auto sales in 2008 rose 6.7% to 9.38 million units. Sales in the first five months of this year rose 14% from a year earlier to 4.96 million units, according to the CAAM data, the first time China's car sales growth has hit double digit percentages this year.The latest data show Chinese consumers are still responding to government measures implemented early this year to boost small car sales, which included subsidies and a purchase tax cut. For example, sales of minibuses, a segment that benefits from the policies, rose 84% in May from a year earlier to 172,600 units.Sales of other vehicle segments have also been growing. Passenger car sales rose 42% from a year earlier to 591,300 units, while sales of sport-utility vehicles rose 26% to 47,700 units, CAAM said.Car sales in China are soaring even as sales in developed markets are falling. New-car registrations in Japan fell 19% in May to 178,503 units and new car registrations in Europe dropped 12% to 1.25 million units in April.Mr. Zeng said the lasting impact of the measures has surprised some in the industry. Forecasts by analysts and industry officials early this year called for flat or low-single digit growth for 2009 and some observers had expected that the impact of the measures would have petered out by now.To be sure, the strong sales so far this year could mean that some buyers are bringing forward the timing of their car purchases, which could cut into sales numbers down the road.However, as sales in the second half of last year were weak, on-year growth is still likely to be positive.China's auto market likely has seen its peak for the year, Mr. Zeng said, adding that June has already shown signs of a slowdown in sales. The summer months have traditionally been slow, he said.Mr. Zeng said the biggest beneficiaries of the government policies are General Motors Corp.'s commercial vehicle joint venture in China, SAIC-GM-Wuling Automobile Co., and Chongqing Changan Automobile Co.Consumers who buy the Wuling Sunshine and Wuling Rong Guang minivans and Changan Star minibuses qualify for the government incentives because of the models' small engines. __ WSJ