China auto sales growth slows again in June

[July 09, 2010]  BEIJING (AP) -- China's auto sales growth weakened further in June as explosive demand driven by government incentives cooled, an industry group reported Friday.

Sales rose 19.4 percent from a year earlier to just over 1 million vehicles, the China Association of Automobile Manufacturers said. Growth has fallen steadily since March, when sales grew by 63 percent.

Automakers are looking to China, the biggest auto market by number of vehicles sold, to drive sales amid weak global demand. Sales this year are forecast to grow by no more than 20 percent, well off 2009's stunning 45 percent rise.

"Growth is definitely slowing, though sales still remain strong," said Zhang Xin, an auto industry analyst for Guotai Jun'an Securities in Beijing.

Sales in the United States rose 14 percent in June over a year earlier but demand weakened as customers worried about the economy.

In China, automakers face rising costs and labor tensions, highlighted by recent strikes at parts suppliers affiliated with Honda Motor Co. and Toyota Motor Corp. that disrupted production.

"China's auto industry faces a possible crisis of rising costs and should not just pursue remarkable sales numbers," Zhang said. "The recent labor unrest should be an alert."

China passed the United States last year as the biggest auto market on the strength of sales tax cuts, subsidies to rural buyers and incentives to encourage drivers to switch to cleaner vehicles.

June sales were driven by an 83 percent spike in purchases of commercial multipurpose vehicles, while purchases of sedans grew by only 10 percent, the CAAM said.

For the first half of the year, sales rose 47.7 percent from a year earlier to just over 9 million units, the group said.

In a report this week, the Nielsen Co. said its annual "China auto trend" survey found buying sentiment has fallen sharply as the effect of Beijing's economic stimulus spending fades and housing costs rise. The share of people surveyed who plan to buy in the next 12 months dropped by 21 percentage points from a year earlier to 32 percent.

General Motors Co. says China became its biggest national market in the first half of the year, overtaking the United States for the first time as sales rose nearly 50 percent to 1.2 million vehicles.

Ford Motor Co. says its first-half sales in China rose 53 percent from a year earlier to 301,524 vehicles.

China's domestic automakers do not release such detailed figures but say sales are growing strongly.

[Associated Press; By JOE McDONALD]

Associated Press researcher Ji Chen in Shanghai contributed to this report.

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