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China Car-Sales Growth Slowed in June as Economy Cooled
Jul 5,2010 11:30CST
data analysis

BEIJING, July 5 -- China's passenger-car sales growth slowed in June as the government acted to tighten credit as it seeks to control inflation and cool the economy.

Sales of cars, sport-utility vehicles and multipurpose vehicles to consumers rose 10.9 percent from a year earlier to 839,228 units last month, the China Automotive Technology & Research Center said today. That compares with 34 percent growth in April and 25 percent in May, according to the center.

China's inflation accelerated in May to an annual 3.1 percent, the quickest in 19 months. Industrial production growth slowed in May for a third straight month to 16.5 percent, while the central bank raised lender reserve-ratio requirements three times this year. Measures to slow the economy may weigh on auto sales, Tim Dunne, an analyst at J.D. Power and Associates, wrote in a June 29 report.

"We hold on to the assumption that the government will continue its tightening measures to cool down the economy in the second half of the year," Dunne said. "We therefore expect vehicle sales to slow to a more sustainable pace following what has largely been incentive-driven strong growth."

China's economy expanded 11.9 percent in the first quarter. Investment bank China International Capital Corp. has said it expects growth to slow to 7.5 percent by the fourth quarter.

First Half Sales

Total vehicle sales, which include buses and trucks, increased 14 percent last month to 1.13 million. Vehicle sales rose 30.5 percent in the first half of the year to 7.19 million, with passenger-car sales expanding 25.6 percent to 5.42 million, according to the agency.

China's vehicle sales may rise 17 percent this year to 16 million, and annual demand for automobiles may eventually exceed 30 million, according to the State Information Center.

China, which overtook the U.S. as the world's biggest vehicle market last year, continues to lead in total sales in the first half, with U.S. sales rising to 5.6 million units during the period.

Production at Toyota Motor Corp., the world's largest carmaker, Honda Motor Co. and Nissan Motor Co. was disrupted in June as workers at Denso Corp. and other component suppliers in China went on strike for higher wages.

At least eight Chinese strikes in the past month have forced suppliers to Toyota, Honda and Nissan to raise wages, which may raise carmakers' costs.

Car and parts makers need to implement salary increases "in a way that is smooth, in a way that is anticipated and realistic," Nissan's Chief Executive Officer Carlos Ghosn said on June 30 in Bangkok.

SAIC Share Sales

Automakers continue to invest in China as the worker unrest continues. SAIC Motor Corp., China's largest carmaker, said on June 25 it aims to raise as much as 10 billion yuan ($1.48 billion) in a private share placement to fund expansion.

The carmaker plans to sell 180,000 of its own-brand vehicles this year, President Chen Hong said in March. That compares with an overall sales target of 3 million for all SAIC-made vehicles this year.

SAIC aims to boost revenue to 245 billion yuan this year from 140 billion yuan in 2009, according to a filing to the Shanghai stock exchange on April 1.




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