2011flash

Auto insiders expect sales to soon get back in gear

By Li Fangfang (China Daily)
Updated: 2011-06-21 10:22

A General Motors' sedan at an exhibition in Nanning, the Guangxi Zhuang autonomous region. Sales of General Motors and its joint ventures in China topped 1 million units in the first five months of 2011. [Photo / Provided to China Daily]

BEIJING - Although China's automobile market is facing challenges such as the first year-on-year sales drop in April since 2009, Kevin Wale of General Motors China is optimistic about the industry's future in the country.

"The downtrend will continue in the short term. However, in six to 12 months, domestic vehicle sales will start to increase again," said Wale, president and managing director of China's largest foreign automaker by sales.

His prediction came after months of slowdown in the vehicle market this year.

Domestic auto sales continued to cool with further negative month-on-month growth in passenger vehicle sales in May, raising concerns that the previous sales target of 20 million vehicles this year may be beyond reach.

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Although the sales of General Motors and its joint ventures in China topped 1 million units in the first five months of 2011, reaching a record 1,079,624 units for the period, the US automaker reported the first negative year-on-year sales growth in the nation in May, with total sales of 190,674 units, down 2.6 percent from last year, without robust sales of its minivans.

"And China will face more serious challenges in the coming months," said Rao Da, secretary-general of the China Passenger Car Association. "By the end of 2011, China's auto market might report the first negative annual growth rate since 1992."

He said the expiration of the government's two-year period of incentives, soaring gas prices and parking fees, purchasing restrictions in big cities and the March 11 earthquake in Japan will continue to deepen the downturn, at least for this year.

However, Zuo Tao, an analyst with Guosen Securities, said he believed that the negative impact of those factors will ease gradually starting in the third quarter, because an inherent demand for vehicles will continue to drive China's automobile market from a long-term perspective.

Zu Guangping, analyst with Hongyuan Securities was much more optimistic. He said that the influence from the expiration of the incentive policies and the Japanese earthquake will dissipate by the end of June. "The passenger car segment will pick up to year-on-year growth of 10 to 20 percent from July."

Moreover, "as the passenger cars on Chinese roads are still far from reaching saturation, the segment will maintain a stable uptrend in the long term", Zu said.