Vehicle sales surge on rush to beat subsidy changes

BEIJING - Passenger vehicle sales accelerated in September as buyers rushed to beat changes in government subsidies for fuel-efficient cars.

However, analysts said, conditions will reverse in the coming months, at least until the first half of next year.

According to the China Passenger Car Association, vehicle sales last month totaled 1,276,574 units, including cars, sport utility vehicles, multipurpose vehicles and minivans.

That figure made September the biggest month for the world's largest auto market since January, when sales began to cool.

September sales surged 22.7 percent from August and 9.1 percent year-on-year, said the association on Thursday.

Average year-on-year growth rates were slightly more than 4 percent in the first eight months of 2011.

"The September sales were stimulated by people rushing to showrooms to buy vehicles" before the government tightened up its subsidy policy on Oct 1, said Rao Da, secretary-general of the association. "The figure and growth rate far exceeded industry expectations."

On Sept 16, the Ministry of Finance said that it would alter its 2-year-old subsidy policy for fuel-saving vehicles, making more than 70 percent of the original 427 models ineligible for the subsidies.

"The tightening policy will lead to a further slowdown after the short-term boom in September. Passenger vehicle sales may see negative year-on-year growth in the fourth quarter," said Rao.

Su Hui, an official at the China Automobile Dealers Association, agreed with Rao.

Price war

In addition to policy changes, the recovery of China's automobile market to a normal rate of growth "also makes it almost impossible to see a sales boom in the fourth quarter like that of last year", said Su.

"Sales in October will even dip, perhaps sparking a price war in the car market."

Jia Xinguang, a Beijing-based independent auto analyst, said he believed that a price war could heat up sales in December. "Chinese consumers are always price-sensitive," he said.

A chill set in for vehicle sales in January, after two years of hot growth backed by government policies.

The sluggish market performance led the China Association of Automobile Manufacturers to cut its forecast for 2011 sales growth to about 5 percent, compared with 10 to 15 percent previously.

Sales grew 32 percent in 2009 and 46 percent in 2010.

Hou Po, managing partner for the automotive sector at Deloitte China, told China Daily that he forecast the domestic automobile market would grow by 8 percent on average over the next five years, "a healthy figure for long-term development".