China Jan car sales plunge due to holiday break

Feb 09 2012, 14:58 IST
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SummaryFull-year outlook solid but breakneck growth unlikely; GM, Ford, VW, Nissan see weak sales, Mazda shines.

January car sales in China declined 23.8 percent from a year earlier, marking the biggest monthly plunge in more than three years as automakers and dealers reduced working hours during the lunar new year holidays, which came earlier than last year.

Sales could regain momentum in February due to in part, the base effect as year-ago sales were weak - the monthly tally was well below the 1 million mark, industry observers say.

Monthly data are skewed especially in the beginning of each year because of the Chinese lunar new year holiday, said John Zeng, director for industry consultancy LMC Automotive Asia Pacific region.

In 2011, the lunar new year break was in February. But it fell in January this year and shortly after the (Western calendar) new year celebrations. That is really not good for car sales.

China's 15-day Spring Festival holidays marking the lunar new year are the country's most important holiday period, and most companies shut down for about a week so workers can return to their hometowns to celebrate with relatives.

Industry insiders are divided on the market outlook for the full year, with forecast growth ranging from less than 5 percent to well over 10 percent. But few are expecting the breakneck expansion seen in 2009 and 2010 to recur.

China's once-booming car market cooled to a 5.2 percent gain last year, after jumping 53 percent in 2009 and 33 percent in 2010.

The slowdown has been attributed to a raft of factors, from the end of tax incentives for small cars to local authorities' initiatives aimed at easing ever-worsening traffic congestion in major cities, such as Beijing.

It's very hard to come up with a precise prediction when it comes to car sales in China. Government policies tend to play a big role here and can easily drive up or pin down the demand, said Sheng Ye, associate research director at industry consultancy Ipsos' Greater China region.

But there is no reason to be too pessimistic this year because of the growth potential in lower tier cities.

Only about 30 out of 1,000 people own cars in the northwestern provinces such as Gansu and Qinghai, a far cry from more than 200 in the Chinese capital city, according to Ipsos.

In January, a total of 1.16 million sedans, sport utility vehicles and multi-purpose vehicles were sold in the country, the China Association of Automobile Manufacturers (CAAM) said on Thursday.

That compared with 1.37 million cars sold in December, up 4.6 percent from a year earlier, according to CAAM.

In the United States, now the world's second-largest auto market, sales rose more than 11 percent in January, a surprisingly robust showing that marked the strongest annualized sales rate for the industry in nearly two-and-a-half years.

In Japan, car sales turned sharply higher in January, buoyed by the government's efforts to help its struggling auto industry, while sales in South Korea shrank on a slowing economy and a lull during the Lunar New Year holiday.

SALES DECLINES

In China, January was not a good month for most foreign auto makers.

Ford Motor shipped 30,976 vehicles to its dealers in the month, down 41.9 percent from a year earlier.

General Motor and Volkswagen AG's car ventures in Shanghai both reported a rare annual decline for sales in January.

Nissan Motor and Dongfeng Motor's joint venture, which vastly outperformed the market in 2011, ended the month with a 20.4 percent fall from a year ago.

Major Chinese auto groups SAIC Motor and Dongfeng, which rely heavily on their foreign partners to dress up balance sheets also suffered.

Dongfeng's January car sales plunged 19.4 percent from a year earlier, while sales of SAIC, GM and Volkswagen's China partner dropped 8.5 percent.

Mazda, a small player in China, however, sold 22,740 cars in the country, up 14 percent.

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