China May car sales rise 'only' 26%, slowest growth rate this year

ERJ staff report (AN)

BEIJING/SHANGHAI (Reuters) -- China's passenger-car sales in May rose 26 percent from a year earlier, the slowest pace this year, setting the stage for more moderate but solid growth in the coming months after fast-paced expansion in 2009.

The growth in the world's biggest auto market started tapering off in April when car sales rose 33 percent, about half of the pace in March, which analysts attributed to a higher comparative base a year earlier.

A more moderate pace is expected for the rest of the year, given rampant auto sales growth especially since the second quarter of 2009, propelled by government incentives to boost consumption along with a near $600 billion economic stimulus plan.

"Auto sales actually fell in January 2009. It wasn't until April that the market started to pick up strongly," said Chen Liang, an analyst with Huatai Securities. "The May data is still pretty solid, but it's just impossible to match last year's run-away growth rate especially in the second half."

China, which eclipsed the United States as the world's biggest auto market last year, has become a safe haven and a key battlefield for foreign automakers still recovering from a steeper than expected industry downturn.

A total of 1.04 million sedans, vans and SUVs was sold last month, compared with 1.11 million units moved in April, the official China Association of Automobile Manufacturers said on Tuesday.

Analysts expect car sales will return to a slower but more rational growth rate of roughly 20 percent in 2010, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows.

From Automotive News (A Crain publication)