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Incentives fail to bolster Dongfeng sales

DONGFENG Automobile Co yesterday reported a 14.3-percent drop in first quarter sales from a year earlier as mainstream models failed to benefit from government incentives.

The listing unit of China's third-largest auto maker sold 43,004 vehicles in the first three months of this year, according to a statement to the Shanghai Stock Exchange yesterday.

Sales of commercial vehicles fell 16 percent to 32,137 units, while combined sales of sport utility vehicles, multi-purpose vehicles and pickups declined 8 percent during the same period from a year earlier.

Engine sales slumped 51 units to 22,541 units from January to March.

Because of the financial crisis and slowing economy, China's vehicle sales suffered their slowest sales growth last year.

But the overall market rebounded since February after China introduced tax breaks on small-engine vehicles and offered vehicle subsidies in rural areas to spur domestic demand.

Analysts said the recovery in car sales is powered by higher demand for minibuses and small-engine vehicles.

"Dongfeng's major products are SUVs and pickups, which are less affected by the government incentives," said Zhang Xin, an analyst from Guotai Jun'an Securities Co.

"But the sales drop has narrowed from a year earlier," he added.

China's passenger car sales rose 10 percent in March to a record high of 772,400 units after a 24-percent surge in February. But commercial vehicles continued to witness a 5-percent decline in sales in March from the same period last year.

Dongfeng earlier said it would focus on expansion in rural areas this year.

The firm's shares rose 4.37 percent to close at 4.54 yuan (66 US cents) yesterday, while the Shanghai Composite Index gained 0.54 percent.


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