Auto rebound?
- Source: Shanghai Daily
- [17:56 May 22 2009]
- Comments
Chinese government incentives on compacts and fuel-efficient vehicles helped underpin record vehicle sales in April, but the boom doesn't necessarily mean profit growth and analysts are leery of predicting that the worst is over for the industry.
China vehicle sales last month jumped 25 percent from a year earlier to 1.15 million units, the China Association of Automobile Manufacturers reported. That compares with year-on-year gains of 5 percent in March and nearly 4 percent for the first quarter.
"Although the auto industry is showing signs of a rebound from its winter chill, it's too early to say we have definitely reached springtime," said Dong Yang, association deputy director.
The industry still faces a bumpy ride. Vehicle exports remain in a slump amid a global economic slowdown, and vehicles not covered by government incentives, including pricier cars and commercial vehicles - continued to suffer weak demand.
Car makers' profits remained low as consumers mainly pursued vehicles that had lower profit margins. Government incentives announced in January are available only to buyers of small cars and to farmers who trade in old clunkers for more fuel-efficient vehicles.
SAIC Motor Corp and FAW Co Ltd, two of China's biggest car makers, reported sharp declines in first-quarter earnings, while commercial light-vehicle manufacturer Dongfeng Motor said profit in the first three months tumbled 98 percent.
"Most of the sizzling car sales come from compact cars and minivans because of the government incentives, but those models are usually less profitable," said Zhang Xin, an analyst from Guotai Jun'an Securities Co Ltd.
"The mid-to-high price segment, which has higher margins, continues to see flagging sales that hurt overall performance," he said.
Still, in a global auto industry beset by diving sales, steep losses, layoffs, production cutbacks and bankruptcies, China's domestic sales provide a cushion for optimism.
Car sales in the United States plunged 34.4 percent in April, while Japan's car industry suffered a 23 percent drop despite government incentives to revive demand.
China's market is showing "a huge contrast with the end of last year when showroom visits fizzled," said a General Motors dealer in Shanghai surnamed Huang.
"Now our showroom is often filled with people, and some auto buyers are so keen they are willing to pay extra for early delivery," he said. "We have nearly sold out our 1.6-liter Buick Excelles, with more orders still coming in."
Passenger car sales in China last month jumped 37 percent to 831,000 units, driven by a 56 percent increase in sales of cars with engine capacities of 1.6 liters or less.