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China overtakes US as world's top car market

CHINA overtook the United States as the world's largest auto market for the first time when it sold more cars, 735,500 units, in January, the China Association of Automobile Manufacturers said yesterday.

But the January figure was a drop of 14.35 percent year-on-year and this indicated that sentiment in China's auto industry is still in a downtrend because of a global financial crisis. Analysts, however, agreed that the market showed signs of an early recovery with government support and lower fuel prices.

Vehicle sales in China rose 6.7 percent to 9.38 million units last year. Sales may grow 5 percent this year, the slowest pace since 1998, CAAM said earlier.

January vehicle sales in the US plummeted 37 percent to 656,693 as more auto makers closed down plants and laid off thousands of workers.

The association reports said China's passenger cars dropped 7.77 percent to 610,000 units last month, following a 12-percent slump in December

But the slower drop in sales was helped by the central government's measures such as cutting fuel prices and halving a vehicle sales tax on small cars to counter a slump in the automotive industry since August last year.

"The fuel tax reform and tax cuts work effectively as sales of vehicles powered by 1.6-liter engine or less enjoyed rapid growth from a month earlier," Zhu Yiping, a director at CAAM, said. "This helped passenger car makers to cut inventory by 80,000 units." He added that the overall stockpile of Chinese car makers also hit its 13-month low.

Selling commercial vehicles remained tough due to the economic situation as their sales plunged 36.46 percent to 125,100 units in January, CAAM said.

China announced a 4-trillion-yuan (US$586 billion) economic stimulus package and favorable policies including tax cuts and road-toll abolishment in January to spur demand.

However, most analyst cautioned that the sales pickup won't last long and they remain skeptical that China would remain the world's biggest car market for the year.

"We should not be too optimistic as the impact of favorable policies may be weaker as time goes on," said Rao Da, secretary general of China Passenger Car Association. "Sales of vehicles with engines larger than 1.6 liters are not expected to boom and overall sales will still be hampered by a weak economic outlook and lower exports."


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