Auto rebound?
- Source: Shanghai Daily
- [17:56 May 22 2009]
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"The government incentives have borne fruit, and the overall situation is much better than our earlier expectations," said Xu Changming, director of the Information Resource Department at the State Information Center.
"In addition, consumers are showing renewed confidence, with less inclination to hold onto their money and take a wait-and-see attitude."
Consumer sentiment has also been boosted by the drop in fuel prices in the last six months.
Industry optimists are buoyed by what they see as a slow but steady recovery in the market.
Caution on profit prospects
China's vehicle sales rose in each of the first four months of this year after they declined for the first time in three years last August.
The auto manufacturers' association has lifted its full-year growth forecast for vehicle sales to 8.7 percent, or 10.2 million units. That exceeds its earlier growth forecast of 5 percent.
Still, the association remains cautious about profit prospects.
Revenue at 19 core auto groups, which generate 50 percent of the industry's revenue, fell 14 percent to 268.6 billion yuan (US$39.3 billion) in the first quarter, while profit slid 48 percent to 10.8 billion yuan.
Li Chunbo, an analyst at Citic Securities, said first-quarter results for listed car makers sank from a year earlier but were improved compared with the fourth quarter of 2008.
"The worst may be over," said Li. "Second-quarter results are expected to show considerable improvement, and the mid-term outlook is likely to outpace market expectations."
A solid recovery will depend on a rebound in exports and sales of commercial and high-end vehicles, analysts said.
Commercial vehicle sales in April edged up 1.4 percent to 322,100 units, but sales in the four months ended April 30 fell 3.9 percent, hurt by low demand for trucks.
The government's 4 trillion yuan economic stimulus package, which is heavy on infrastructure spending, is expected to eventually trickle down and give a boost to commercial vehicle sales.
Exports of both completed cars and car components in the first three months of this year slid 34 percent to US$6.4 billion. Exports for completed vehicles plunged 61 percent.
The drop in exports has been blamed on recessions in key markets and higher production costs.
Higher overseas thresholds for safety and emission standards also complicated market conditions for low-priced Chinese vehicles.
"There is a growing need for the Chinese government to launch incentive programs for commercial vehicles and exports," said Dong from the manufacturers' association.
Still, the industry shouldn't rely entirely on incentives because their effects tend to fade with time, according to Rao Da, secretary-general of the China Passenger Car Association.