China caps boom year for autos with Guangzhou show

[December 20, 2010]  GUANGZHOU, China (AP) -- Automakers are forecasting strong China car sales in 2011 despite the end of some government incentives as the country's second major auto show this year kicks off in the southern city of Guangzhou.

China overtook the United States in 2009 as the world's biggest car market, with sales surging 45 percent to 13.6 million vehicles. Monthly sales this year have seen double-digit percentage growth and analysts are forecasting sales may climb roughly 30 percent to about 17 million vehicles for the full year.

Such explosive growth may not continue in 2011 because a tax cut on new vehicle purchases is expected to end. But a rebate of 3,000 yuan ($450) on cars with small engines will stay in place, as the government seeks to encourage people to drive more fuel efficient vehicles.

"We think the fundamentals of growth in China are very strong," said Kevin Wale, president and managing director for GM China, citing an economy that is expected to expand 8 percent or more annually, high consumer confidence and a global economy that is starting to rebound.

"To be honest, the Chinese have developed a love affair with the car."

Unlike its glitzier cousins in Beijing and Shanghai, which are held in alternating years and are aimed more at establishing China's presence globally with product launches, the Guangzhou show has always been aimed at local buyers.

But car makers are still putting on a show for the tens of thousands of potential buyers expected to pour into the eighth annual Guangzhou International Automobile Exhibition, in bustling Guangdong, one of China's most prosperous provinces. The show, known as Auto Guangzhou, runs from Monday -- its media day -- through to Dec. 27.

By the time 2010 is over, Wale said, GM will have sold about 2.3 million cars in China, while next year sales will climb about 10 percent to more than 2.5 million.

Other automakers at the show were also optimistic that sales next year would be just as good as in 2010, brushing off the effect of the end of the incentives.

"I expect there will be a rush to buy cars before the tax goes up at the end of the year, then an adjustment period and then things go back to normal," said Richard Baker, deputy general manager of Ford's joint venture in China with Chang'an Automobile Group and Mazda.

Ford expects to sell 305,000 vehicles in 2010 through the joint venture, up 32 percent from a year earlier, Baker said.

For 2011, Ford expects that number to go up, but wouldn't give a sales target. "We hope to sell a little bit more than the market in general" next year, Baker said.

During the financial crisis two years ago, China's government was eager to promote the car industry as a way of boosting China's economy, said John Zeng, head of Asia automotive forecasting at JD Power & Associates.

Car sales boomed but the government is now trying to rein in that growth.

"Now in many big cities the pollution and traffic jams have become a big social issue. Now they are talking about charging congestion fees and raising the car tax," he said.

Zeng predicted that 17.5 million passenger cars and light trucks in would be sold in China this year, while in 2011 sales would grow by 10.5 percent.

For many foreign automakers, China is their best hope as they struggle with weak sales in the U.S. and other developed markets.

Marques from around the world are represented in Guangzhou, ranging from the mass market appeal of Hyundai Motor Co. and Suzuki Motor Corp. to prestige offerings from Porsche AG, Maserati and Aston Martin.

Guangzhou is a big base for Japanese carmakers such as Honda and Toyota, which both have joint ventures with Guangzhou Automobile Industry Group.

Toyota Motor Corp. and its upscale Lexus division are out in force with 45 models on display, three of them making their China debuts. Nissan Motor Co.'s 10th-generation Sunny compact made its global debut. It was one model among the 18 cars it has on show, including six from its luxury Infiniti brand.

Nissan and one of its local joint venture partners, Dongfeng Motor Group Co., hope to sell 772,000 vehicles in China next year, said Ren Yong, vice president of Dongfeng Motor as he unveiled Nissan's new local brand, Venucia.

At the moment, the Venucia is just a concept and Dongfeng Nissan showed just the front half of the car to journalists. The brand is aimed at selling affordable cars to entry level buyers. It follows the release of General Motors' only-in-China entry level brand, Baojun, which started rolling off the assembly line on Nov. 22.

Nissan, which earns a quarter of its global revenue from China, said it expects to sell 1.15 million vehicles in China across all of its businesses next year, up 15 percent from 1 million this year.

Local car makers, which have been itching to expand overseas, also have a presence.

Geely Holding Group, little known outside of China until it bought Sweden's Volvo Cars from Ford Motor Co. earlier this year in a $1.5 billion deal, will have at least 13 models on display.

For its part, Volvo showed seven models including its S60 sport sedan and electric C30, which will be fleet tested in China next year.

Industry observers have been keenly interested in what changes Geely would make to Volvo.

The company now has a "clear plan from the new owners," said Alex Klose, chief executive of sales distribution for Volvo China. And because it is now Chinese-owned, Volvo will "have much more of a focus on China than before," he said.

[Associated Press; By KELVIN CHAN]

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