General Motors

Carmakers upbeat despite slowing sales and state curbs

PUBLISHED : Tuesday, 19 April, 2011, 12:00am
UPDATED : Tuesday, 19 April, 2011, 12:00am

Carmakers in the world's biggest car market are shrugging off slowing sales and government restrictions on new vehicle purchases and instead targeting a massive increase in sales and production over the next five years.

General Motors yesterday announced plans to double its sales in China by 2015 to five million cars, up from 2.35 million units last year. Shanghai Automotive Industry Group (SAIC), which partners GM and Volkswagen on the mainland, would nearly double its production capacity over the same period to six million units, vice-president Zhou Langhui told a separate forum ahead of today's opening of China's biggest car show.

Likewise, Guangzhou Automobile Group, which partners Honda and Toyota and is launching new ventures with Fiat and Mitsubishi, would triple production capacity over the same period to about three million units, general manager Zeng Qinghong said.

Ambitious new targets by mainland carmakers come as growth of passenger cars slowed to 9.1 per cent in the first three months of the year, down sharply from the 76 per cent growth recorded in first quarter of last year and 33 per cent for all of 2010. But even 'if you take away the short-term plus or minus variation caused by government policy, the underlying trend growth is still very solid', GM China president and managing director Kevin Wale said yesterday at a media briefing.

Some 2,000 automotive companies from 20 countries have converged on Shanghai this week for China's biggest annual car show.

Despite their bullish long-term views, analysts and carmakers are bracing for slower growth this year following the end of most government stimulus measures. A host of tax cuts, rebates and subsidies that Beijing put in place throughout the financial crisis ended on January 1 this year.

Those measures included a reduction in the 10 per cent purchase tax for cars with engines smaller than 1.6 litres, a 'cash for clunkers' programme, offering rebates to replace old vehicles, and a 'cars for the countryside' scheme subsidising rural car buyers.

At the same time, major cities grappling with epic traffic congestion are expected to roll out some form of restrictions on new car purchases after Beijing in January implemented a strict lottery system for new car licence plates.

Still, one key incentive remains in place - a nationwide 3,000 yuan (HK$3,565) subsidy for purchases of cars with engines of 1.6 litres or smaller, introduced in July last year.

And the bigger market fundamentals remain strong. On average, the mainland had 58 cars per 1,000 people at the end of last year, Ministry of Industry and Information Technology deputy minister Su Bo said yesterday. That is only half the global average and less than one-tenth the average in major developed markets, according to Su.

'That means there is still a lot of potential for growth, especially in second and third-tier cities,' he said.