Carmakers surge on talk of extension to state support

PUBLISHED : Tuesday, 01 December, 2009, 12:00am
UPDATED : Tuesday, 01 December, 2009, 12:00am

The share prices of Hong Kong and mainland-listed carmakers rose yesterday on media reports that Beijing would extend this year's support measures for the industry to next year in order to maintain the high level of vehicle sales.

Beijing announced early this year the consumption tax for cars with engines of 1.6 litres or less would be reduced to 5 per cent from 10 per cent. The government also provided villagers with subsidies of up to 5,000 yuan (HK$5,675) to buy cars costing 30,000 yuan to 40,000 yuan.

Industry players began lobbying the government in the middle of the year to extend the stimulus policies.

'Government policy drives confidence, which in turn drives sales,' said Soh Weiming, an executive vice-president for sales and marketing at Volkswagen Group China.

But the central government has not yet officially announced details of support measures for next year.

Meanwhile, executives are waiting for Beijing to announce an expected subsidy programme to help promote the commercialisation of alternative-fuel vehicles, such as hybrids and pure electric cars.

Brilliance China Automotive Holdings surged 18.9 per cent yesterday to HK$2.45. Economy carmaker Geely Automobile Holdings rose 11.7 per cent to HK$3.92. Other carmakers, including Denway Motors, Great Wall Motor, BYD and Dongfeng Motor Group rose between 5 per cent and 11 per cent.

Another economy carmaker, mainland-listed FAW Car, rose 9.2 per cent to 23.95 yuan. The largest carmaker, Shanghai's SAIC Motor Corp, closed 7.5 per cent higher at 25.37 yuan and Changan Automobile rose 5 per cent to 14 yuan.

With the support of the government, China expects to reach sales of 13 million vehicles this year, up from 9.38 million units last year.

The mainland market was the only one to grow this year and has surpassed the United States' to become the world's biggest. Market watchers expect the US to reach sales of about 11.5 million units this year and do not expect a strong pick-up there until after next year.

Analysts expect the growth rate on the mainland to decelerate next year because the comparable base this year is so high.

However, according to an industry report from China International Capital Corp, car sales could maintain a 15 per cent growth rate next year if first-time car buying demand continues to rise in inland regions.

The report further said the home-grown brands, such as Geely, FAW Car and Chery Automobile, should be the biggest beneficiaries of increased inland demand under the government's supportive measures.

Global carmakers, such as Volkswagen China, plan to build up their sales networks in second-tier cities to take advantage of higher consumption in the villages.

Total sales for the first 10 months of General Motors China were boosted by the robust sales of its Wuling minivan, which is the usual transporter for villagers.