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Stimulus Led China Auto to New Heights in April 09
May 29, 2009

China automobile sales continue growing in April 2009 and set a new sales record, mainly due to the stimulus package offered by the government.

According to the estimation of the China Association of Automobile Manufacturers (CAAM), the automobile sales in China touched the record figure of 1.15 Million Units in April 2009, as reported by Xinhua.

Sales of economy cars and minivans increased in April 2009, as over 50% year-on-year sales gains registered by China’s largest minivan manufacturers, SGMW and ChangAn. China’s Chery, the maker of small engine capacity cars, witnessed record sales of over 42,000 Units during the same month. Besides, March 2009 also observed a YOY growth of 5% in automobile sales that reached 1.11 Million Units.

The prime reason behind the record breaking sales of automobiles in China during April was the government’s stimulus aid that granted various tax benefits and subsidies on light trucks and cars having small capacity, fuel-efficient engines.

In other words, it can be said that the government of China is encouraging consumers to purchase fuel-efficient cars which, in turn, fuelling their demand. Consequently, the domestic companies are trying to acquire such technologies from other countries. 

To offset the declining sales in the US and Europe, several automakers, including Volkswagen AG, are expanding their business in China, which is the largest automobile market in the world so far in 2009.

Vehicle sales in China during the first four months of 2009 (January-April) climbed to 3.83 Million Units at the rate of 9.4% compared to the US where sales tumbled 37% to 3 Million Units on account of recession. 

Increased sales of minivans having cost of merely $4,400 per unit is insufficient to significantly improve the earnings of the Chinese auto manufacturers as there is intense competition in the market. The top 19 automobile groups recorded 48% decline in their collective profits for Q1 2009 that reached 10.8 Billion Yuan. Also, there was a 14% drop in revenue that slid to 269 Billion Yuan. 

According to a Research Analyst at RNCOS, “Almost the entire world is witnessing downfall in auto sales excluding China, where auto sales reached record height in April 2009. In fact, the Chinese auto industry sales and revenue may be further improved, provided the oil and steel prices remain stable.”

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