Car Sales Growth in China May Be Slower Than Automakers' Estimates in 2011

China’s passenger-car sales may grow at a slower pace this year than was earlier estimated by a group of the nation’s automakers after the government ended incentives for purchases and raised fuel prices.

Sales growth in China this year may fail to reach a previous estimate by the China Association of Automobile Manufacturers for a 10 percent to 15 percent increase, said Dong Yang, vice chairman of the association.

“I am concerned about whether our growth rate is too low,” Dong said at a briefing in Beijing yesterday. “Some automakers’ profitability may be undermined this year and some may even face difficulties in their operations.”

General Motors Co. (GM), China’s biggest overseas automaker, posted slower sales growth in the nation for the second month in March as the government reinstated a 10 percent sales tax and phased out subsidies for vehicle trade-ins in rural areas. Last year, overall auto sales surged 32 percent to a record 18.1 million, helping the nation stay the world’s largest vehicle market for the second year.

“Last year, sales were very much boosted by government incentives,” said Klaus Paur, managing director of automotive for Greater China at Synovate Motoresearch in Shanghai. “Now this year these are going away and it is of course slowing.”

Dispatches of cars including multipurpose vehicles and sport-utility vehicles to dealerships in March rose 6.52 percent from a year earlier to 1.3 million units, the association said yesterday. That pace was about one-tenth of the 63 percent sales increase reported in March of last year.

‘Below Expectations’

“The overall vehicle sales growth in March was below our expectations,” Zhu Yiping, the association’s statistics head, said at the briefing in Beijing. March has historically been a peak period for car sales in China following the week-long Chinese New Year holiday that was celebrated this year from Feb. 2 through Feb. 8, according to the association.

Total vehicle sales gained 5.4 percent in March to 1.8 million units, the auto group said. Vehicle sales for the first quarter increased 8.1 percent to 5 million units.

Passenger car sales during the first quarter rose 9.1 percent to 3.8 million units, according to the association.

“Car sales growth may continue to slow for a few more months as customers brought forward purchases to the end of last year,” said Harry Chen, an analyst with Guotai Junan Securities Co. in Shenzhen. “The pace may pick up again in the second half as potential demand is still there.”

The government on April 7 increased retail gasoline and diesel prices for the second time this year after oil advanced to a 30-month high.

GM Sales

GM sold 233,014 vehicles in China last month, the Detroit- based company said April 2. Deliveries barely rose from March 2010’s 230,048 and followed a 6 percent increase in February.

Honda Motor Co.’s sales fell 5.3 percent last month from a year earlier to 58,611 units, the automaker said April 6. BYD Co., the automaker backed by Warren Buffett, reported a 41 percent plunge in March sales.

Ford Motor Co. (F) boosted sales in China 20 percent to 53,440 units in March. Deliveries of Ford-brand vehicles by Changan Ford Mazda Automobile, the Dearborn, Michigan-based company’s Chinese passenger car unit, totaled 42,157 vehicles in March, the carmaker said April 7.