Rescue mulled as car sector loses steam

PUBLISHED : Wednesday, 14 January, 2009, 12:00am
UPDATED : Wednesday, 14 January, 2009, 12:00am

Vehicle sales on the mainland are expected to grow only 5 per cent this year after recording the lowest sales growth in a decade last year, according to the China Association of Automobile Manufacturers.

Last year, mainland carmakers sold 9.38 million vehicles, including buses, trucks and export vehicles, up 6.7 per cent from 2007, in line with the adjusted expectations of analysts.

The association set a sales target of 10 million vehicles at the beginning of last year, when the business environment was still robust.

Except for October, the traditional peak season for buying cars during the Golden Week holiday, the mainland recorded monthly sales declines in August, September, November and December, as the A-share market slump dampened consumption.

Nick Reilly, the Asia-Pacific head of General Motors Corp, said at the Detroit Auto Show on Monday vehicle sales industrywide in China could fall as much as 10 per cent year on year in the first half of this year before 'robust growth' resumed.

He said vehicle sales could reach 9.5 million units this year. That forecast represents a further slowdown from 6.7 per cent growth last year, well below the industry's 20 per cent sales growth in the past few years.

Global majors such as Volkswagen, GM and Toyota Motor Corp have recorded slower sales in China.

Geely Automobile Holdings said yesterday sales last year rose 12.5 per cent from 2007. But the Zhejiang firm's sales volume of 204,205 units missed its target by 11.22 per cent.

Geely's direct rival, Anhui-based Chery Automobile, fell short of its full-year target of 420,000 units, selling only 356,000 vehicles.

The sliding sales growth has alarmed Beijing and the industry, prompting the State Council to discuss today a rescue package that will includes cutting the 10 per cent consumption tax.

SAIC Motor Corp closed up 1.52 per cent at 6 yuan (HK$6.80) yesterday after rising as much as 3.9 per cent to 6.20 yuan, a three-week high, on hopes for a rescue package.

Shares in other Hong Kong-listed carmakers such as Great Wall Motor, Denway Motors, Geely and Brilliance China Automotive Holdings fell, but Dongfeng Motor Group gained 1.56 per cent to HK$2.61.