China Sees Strong Auto Sales - Analyst Blog

By
A A A

China saw an impressive 24.5% rise in auto sales to 1.57 million units in February this year due to strong passenger vehicle sales and February last year being a low comparing base on the back of Chinese holiday.

According to the China Association of Automobile Manufacturers (CAAM), passenger vehicle sales surged 26.5% to 1.21 million units thanks to the rising disposable income and growing demand from lower tier cities.

General Motors Co. ( GM ) and Ford Motor Co. ( F ), who heavily rely on the Chinese market, posted a strong 30% and 28% increase in sales in February, respectively after recording declines in January this year. Meanwhile, sales of the leading domestic automakers, Dongfeng Motor Group Co. and Shanghai Automotive Industry Corporation (SAIC), grew 40% and 30%, respectively during the month.


In the U.S., lig ht vehicle sales escalated 15.7% to seasonally adjusted annual rate (SAAR) of 15.1 million units in February, despite higher gasoline price (up 10% to $3.74 per gallon) and lower spending on discounts and promotions by automakers (down 4.7% to $2,457 per vehicle).

In fact, the SAAR during the month was the highest achieved by the U.S. auto industry since 2008. The factors that led to improved sales include pent-up demand (when the average age of cars on U.S. roads is 10.8 years), decreasing unemployment and higher consumer confidence.

Auto sales in China had grown at a double-digit pace since 1999, except in 2008 when the global economic crisis crept in. In 2009, China overtook the U.S. as the biggest auto market in the world by sales volumes when the Beijing government introduced a stimulus package, including tax incentives for small cars with engine sizes of 1.6 litres or smaller.

However, the incentives were scrapped last year and the Beijing government imposed quotas on new car registrations in order to control the traffic congestions. As a result, new car deliveries plummeted 56% to 403,500 units in 2011.

Nevertheless, China's automotive industry outlook is promising in 2012. According to CAAM, car sales in 2012 are expected to grow by 9% in the country, which is much higher than 2011 (2.5%). Although we are concerned about its decreasing GDP growth, the recent monetary and fiscal policies adopted by the government are likely to ease the fall.


 
FORD MOTOR CO ( F ): Free Stock Analysis Report
 
GENERAL MOTORS ( GM ): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: F , GM

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

84%
61%

Most Active by Volume

85,117,424
  • $6.78 ▲ 11.88%
77,261,676
  • $17.53 ▲ 1.56%
61,066,548
  • $6.90 ▲ 2.99%
56,847,440
  • $112.65 ▲ 2.96%
52,788,366
  • $7.78 ▲ 1.83%
50,761,400
  • $25.14 ▲ 2.91%
47,781,237
  • $45.35 ▲ 10.18%
45,664,909
  • $7.17 ▲ 2.14%
As of 12/18/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com