China car sales soar

China's passenger car sales climbed 55 per cent in from a year earlier in February, despite a long national holiday, on strong demand for smaller cars and sport utility vehicles, an industry group reported Tuesday.

Sales of cars, commercial vehicles and SUVs rose to 942,900 units, while sales of all vehicles including trucks and buses rose 46 per cent year-on-year to 1.21 million, according to the government-affiliated China Association of Automobile Manufacturers.

Unlike the U.S. or Canada, China's auto industry does not release monthly sales data adjusted for annual rates. U.S. auto sales rose 13 per cent from a year earlier to an annualized rate of 10.4 million, according to Autodata Corp.

Tax cuts and subsidies for small-car purchases pushed demand sharply higher last year, with total vehicle sales leaping 45 per cent to 13.6 million, making China the world's biggest auto market, as American car sales languished.

China appears to have kept that lead so far in 2010, though February is traditionally a slow month for auto sales in both markets. The Lunar New Year holiday in mid-February kept China's sales well below the 1.1 million passenger cars sold in January, when sales more than doubled from a year earlier.

Sales likely to slow

Analysts have forecast sales growth to slow this year. Some of the strong growth seen in January was from orders booked late last year, said An Yun, a researcher at Changxin Fund in Shanghai.

"I don't expect sales in 2010 to be as good as last year, though the question is how much slower they will be," An said. "To be fair, we need to watch what happens in the next couple of months."

In January-February, vehicle sales jumped 84 per cent year-on-year to 2.87 million, while production rose 92 per cent to 2.82 million, the auto industry association said.

A large share of the vehicles sold in China are small passenger cars and minivans used by farming families and small businesses -- the focus of the tax cuts and other policies aimed at spurring sales of fuel-efficient vehicles.

In February, automakers sold 623,100 passenger sedans, up 46 per cent from the year before. Sales of multi-purpose vehicles, mainly vans and minivans, jumped 72 per cent to 25,200, while sales of SUVs more than doubled to 70,300, the association said in a report on its web site.

Chinese brands most popular

It said sales of Chinese-brand vehicles continued to advance, claiming about half of sales in February.

All of the foreign automakers face tough competition from the Chinese partners they mentored in joint ventures the government requires as a condition for manufacturing in China.

But Toyota Motor Corp.'s own troubles with recalls of vehicles for braking and gas pedal problems are putting it under even greater pressure to drum up sales.

The Japanese automaker, which has recalled 75,522 RAV4s in China, saw sales of its venture with FAW Group drop out of the 10 top-selling models in February, the state-run newspaper China Daily said Tuesday.

Toyota's overall sales in China slipped to 45,400 units in February from 72,000 the month before.

The company is running big ads in Chinese newspapers offering zero-interest financing for buyers of its Crown sedan, along with a gas coupon worth the equivalent of $13US the number 88 is considered lucky in Chinese and $140 worth of insurance.