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China Auto Sales Soar on Stimulus Package
Mar 02, 2009

With an increase of 4.4% in passenger car sales during January 2009, China surpassed the US in monthly automobile sales.

According to the China Association of Automobile Manufacturers, automobile sales in China witnessed an unexpected rapid growth in January 2009, as reported by Financial Times.

China overtook the US in monthly automobile sales for the first time in January 2009. Volume automobile sales during January 2009 surged 4.4% to 610,600 passenger cars (including sports utility vehicles) from December 2008. Besides, the production of Chinese autos soared to 658,800 Units in January 2009, an increase of 5.07% over the previous month. In the same month, sales of cars with engines less than 1.6 Liters witnessed robust growth against January 2008. However, the commercial vehicle segment recorded fall in demand with total volume sales declining 20.35% from December 2008 and reaching 125,100 Units in January 2009. 

The Chinese automobile industry leveraged the government incentives to escalate its sales. Recently, government has taken the decisive step of providing wide ranging subsidies and tax cuts to provide support to its automobile industry. Sales tax on cars having engines smaller than 1.6 Liters has already been reduced to half, i.e. to 5%, through the year-end. Moreover, farmers will get subsidies of 5 Billion Yuan (around $730 Million) to replace their three wheel vehicles or old trucks with engine capacity 1.3 Liters or lesser. This subsidy will give impetus to sales of cars with small engines.

Moreover, the automobile industry was benefited by the week-long New Year holiday that fell in January and during which vehicle demand ascended high. 

Although the automobile sales surged on monthly basis, January 2009 figures were significantly lower by 7.76% from the corresponding month last year. The slowdown in the annual sales is accredited to the ongoing economic slowdown that pushed consumer sentiments to the lowest level, thereby hitting the car market.

Despite annual sales decline, auto industry is expected to see improvement in sales during February 2009 as people who postponed their purchases for taking benefits of new government incentives will open their wallet.

According to a Research Analyst at RNCOS, “Chinese auto industry rolled on the government stimulus package to increase sales of home-made passenger cars, indicating positive trend for the industry. However, the auto sales growth is likely to remain in the low single digit throughout 2009.”

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