Shanghai: China`s auto sales surged past the United States to reach record levels last year on government incentives, and automakers are poised for solid but slower growth in the world`s fastest growing major auto market in 2010.
After a landmark year in which China zoomed past the United States and Chinese automakers made key acquisitions abroad, Beijing`s renewed policy incentives to bolster demand will likely keep it as a bright spot for car manufacturers battered by the financial crisis.
Vehicle sales in the country came to a record 13.6 million units in 2009, the China Association of Automobile Manufacturers said on Monday, well above the country`s previous target of 10 million units.
That compared with annual sales of 10.4 million cars and light trucks sold in the United States, the lowest level in 27 years.
The Chinese tally, which also includes heavy vehicles, is still higher than that of the United States after deducting roughly 650,000 units of heavy trucks, Orient Securities said.
"Sales have been extremely hot in most parts of last year with little seasonal changes. Many people have to wait for weeks or even months to get their cars," said Qin Xuwen, an analyst with Orient Securities.
China`s passenger car sales jumped 52.9 percent to 10.3 million units in 2009, rebounding sharply from single-digit growth a year earlier, official data showed.
Sales in December surged 88.7 percent to 1.1 million units, topping 1 million units for monthly sales for the third time this year.
Analysts attributed the boom largely to Beijing`s policy initiatives, which had effectively lifted market sentiment and attracted buyers back to showrooms.
A low comparative base in 2008, when car sales slowed to a single-digit growth rate for the first time in at least 10 years, also helped inflate the 2009 growth rate.
The market, they said, would return to a slower but more rational growth rate of roughly 10 percent in 2010 on continued policy support from the government even though the renewed tax incentives for small cars were not as aggressive as expected.
Industry executives themselves, including Chen Hong, president of SAIC Motor Corp, China`s biggest automaker and a GM partner, remain sanguine about the outlook for next year, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows.
BYD, 10 percent owned by Warren Buffett`s Berkshire Hathaway, raised its 2010 sales target last week after achieving its 2009 sales goal ahead of time.
It now aims to sell 800,000 vehicles next year, up from a previous target of 700,000 units, Paul Lin, manager of the company`s marketing department, told.
Too important to ignore
China is now a safe haven for industry heavyweights battered by a sharper-than-expected industry downturn, which had forced two of Detroit`s big three automakers into bankruptcy in 2009.
General Motors, still majority-owned by the U.S. federal government, agreed late last year to cede control of its flagship car venture to partner SAIC Motor Corp.
Volkswagen AG also pledged to invest 4 billion euros ($5.8 billion) in China through 2011 to expand its production capacity and shore up its R&D.
Ford Motor, a relatively latecomer to China and a cautious player, broke ground in September for its long-contemplated $490 million third China plant.
"China used to be the one that was eager to attract big, outside investment, but it`s the other way around now," said Zhang Xin, an analyst with Guotai Junan Securities.
"It`s a market too important to ignore."
The past year has seen Chinese automakers venturing on to the global stage for the first time in a major way, ready to snap up big-name brands, such as Volvo and Hummer, which they previously admired from afar.
Zhejiang Geely Holding Group, parent of Geely Automobile, is on the verge of acquiring Ford`s Volvo car unit, following Beijing Automotive Industry Holding Co`s purchase of some Saab platforms in December. Sichuan Tengzhong Heavy Industrial, an obscure machinery maker, has also agreed to take over GM`s Hummer brand.
But Chinese automakers are still facing an uphill battle to become truely global players, industry observers said. The short-cuts they have taken, hoping to lead them to the hall of fame, may turn out to be a long and arduous journey.
"It`s no surprise China`s auto industry wants to go international," said Klaus Paur, director of global industry consultant TNS`s North Asia Automotive division.
"But I have the impression they are getting too ambitious. There are a lot of question marks here as they don`t even have a solid brand in their home market."