China's Car Sales Soar

Sales of China’s passenger cars have jumped 63 percent from the year before, as manufacturers scramble to keep up with high demand driven by tax cuts and and government subsidies. According to the China Association of Automobile Manufacturers, passenger car sales rose to 1.26 million automobiles in March. The projections show sustained growth for auto manufacturers in a market that is still rebounding from slowed sales in late 2008-2009 while the government pumped hundreds of billions of renminbi into the economy.

Many consumers in China are still buying their first cars, and demand for larger vehicles is growth as higher income families are trading up. Total sales climbed 1.7 million units over the past year, surpassing market estimates and bringing sales in the first quarter of 2010 to 4.6 million. Analysts are confident that total vehicle sales will surpass 17 million units this year, growing by at least 25%.

Domestic producers are enjoying strong growth and running overtime to meet demand at home and abroad. China’s growth has also given foreign automakers like General Motors and Toyota a boost while they weathered tough conditions in the saturated U.S. market. Ford’s first quarter sales jumped 84% and Toyota’s rose to 33% despite its massive recall problems. GM reported that its sales in China jumped 68% in March over a year ealier to a new monthly record of 230, 048 vehicles. First quarter sales totaled a whopping 623, 546 units, a 71% surge.

General Motors expects to increase its annual sales in China to more than three million vehicles by 2015.  GM China Group President Kevin Wale said that the country’s automotive market will continue with more than enough strength to offset reduced government support for the industry. GM’s business in China is done through a web of joint-ventures, most notably through sales credited to Wuling Automobile Co, a  JV with SAIC Motor Corp., in which GM owns just over a third.

While the U.S. market is slowly recovering, it has no chance of matching China’s growth figures. China pushed past the U.S. as the world’s largest auto market in 2009 as sales rose to nearly 13.6 million vehicles. While demand in China’s enormous cities is growing, demand in more rural areas has also taken off. Vehicles in China can generally be purchased for a fraction of what U.S. vehicles cost, with demand growing fast among light commercial buyers and farmers. GM and other dealers will certainly continue to expand operations and introduce new models to meet climbing demand.

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