Commercial and heavier transport save decline in data for first four months Sales of passenger cars in the mainland fell in the first four months of the year, as rising materials costs and competition drove down prices and profits. Figures published yesterday by the China Auto Industry Association showed vehicle sales in the four months of 1.803 million units, up 1.57 per cent over the same period last year. But just 1.14 million passenger cars were sold, down a comparative 0.62 per cent. Last month, the top five producers - First Auto Group, Shanghai Auto Industry Group, Dongfeng Auto, Beijing Auto and Changan Auto - accounted for 67 per cent of sales. Except for First Auto, all posted sales drops in the month compared with March. Growth in the market is slowing dramatically, from an annual 40 per cent in 2002 and 2003 and 14 per cent last year, while the leading companies are expanding capacity, raising fears of a production glut. 'I am not optimistic for 2005,' said Xu Xiang, an analyst with Southern Securities. 'The rate of increase will continue to fall. I forecast an increase of 5 per cent overall in this market this year. 'Most promising are medium-size and large commercial vehicles and least promising are passenger cars, where I see falling prices and profits, as the cost of raw materials rises,' he said. Hurting consumption are soaring fuel prices, bank controls on car loans, worsening traffic congestion and scarce parking space in key cities. There is also an expectation among consumers that prices will fall further, prompting them to defer buying. Worse, the market is not consolidating but diversifying, with more players and more models, spreading profits even more thinly. Among the worst hit is Volkswagen, which has two joint ventures - in Changchun and Shanghai - and 40 per cent of the market as recently as 2002. It was down to 25.2 per cent last year, when annual sales fell 7.1 per cent to 648,500. National Business Daily reported that VW's Shanghai joint venture this year would produce 250,000 units, against a design capacity of 400,000, and that two of its plants were closed, to allow for retooling for production of new models as well as Skoda cars. A spokeswoman for the Shanghai joint venture said the plants were undergoing routine maintenance and upgrading, which would take between one week and two months. 'This is very normal,' she said, without elaborating. Winfried Vahland will resign his post as deputy chairman of Skoda on June 30, to take over as head of Volkswagen's China operations from Bernd Leissner, who is retiring. Dongfeng Yueda Kia Motors lost 42 million yuan in the first quarter, against a profit of 60 million in the same period last year? the Oriental Morning News reported. Sales were stagnant at 26,000 in the first four months, unchanged from the year-earlier period. The firm, a joint venture with Kia Motors of South Korea, declined comment. Meanwhile, General Motors, which announced sales of 190,676 units in the first four months, saw an increase of 7.2 per cent over the same period last year, giving it a market share of more than 10 per cent and taking it closer to its goal of overtaking VW as the top foreign carmaker in China.