Metals News
Preferential Policy for Auto Purchase Cancelled, Start-Up Lead-Acid Battery Sales Slow
smm insight
Mar 14,2011

Shanghai, Mar. 14 (SMM) -- During 2010, China’s government implemented preferential policies for automobile purchases, including subsidies for rural residents and trade-ins.  However, these two preferential policies ended at the end of 2010, so SMM expects production and sales of automobiles will fall in 2011, reducing demand for lead-acid battery orders as well.

According to data from China Association of Automobile Manufacturers, production of automobiles during 2010 hit 18,264,700, up 32.44% YoY.  Automobiles sales were 18,060,000, up 32.37% YoY, and pushing China to the number one spot in automobile sales. Three reasons are believed behind the significant growth in both production and sales of automobiles in China.  First, China’s economy consistently improved during 2010.  Second, China implemented numerous stimulus policies to increase automobile sales.  Third, consumer spending and purchasing power grew steadily during 2010.

Boosted by strong automobile sales in China, lead-acid battery output during 2010 also experienced strong growth as well.  Statistics reveal battery output was 144,166,800 KVAH in 2010, up 17.34% YoY.  Start-up batteries have the largest share of lead-acid batteries, so strong vehicle sales were reflected in that battery category’s rapid development.

Although automobile demand in China is still rising, output and sales during 2011 will not likely be as strong as 2010 since some purchases were moved forward to take advantage of 2010  stimulus policies.  The China Association of Automobile Manufacturers predicts growth in production and sales during 2011 to be 10%-15%, but some more cautious market players expect growth lower than 10%.  In this context, producers of start-up lead-acid batteries are cautiously optimistic about battery orders during 2011.  Start-up batteries may be able to maintain current growth from other positive policies, but since car batteries account for over 80% of total start-up batteries, orders would be severely affected by weaker car sales in  2011. 

China’s battery exporters are facing growing pressure from the appreciating RMB, and surging crude oil prices will also depress new car sales.  In this context, SMM expects slower growth in production and sales in China’s start-up lead-acid battery sector during 2011.


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