China has positioned itself as the world’s largest auto market, surpassing the U.S. with sales surging 36.5% year-over-year to 1.14 million units in June 2009. According to the China Association of Automobile Manufacturers, passenger car sales in China were 872,900 vehicles in June, 2009 whereas passenger car sales in the US for the same period were 859,847 units.
According to the Associated Press (AP), China’s total vehicle sales were up 17.7% to 6.1 million vehicles during the first half of 2009. China has overtaken US auto sales for five of the past six months. The U.S. market temporarily took the lead in May 2009 only to drop again the following month.
Stimulus package including lower sales tax, subsidies to trade in older cars and other incentives provided by the government has helped sales in China. According to the AP, the government of China has reduced retail sales tax on small cars by 50% in the beginning of 2009.
The government is also providing subsidies in rural areas to increase demand. Global automakers such as Ford Motors (F), General Motors (GMGMQ) and Toyota Motors (TM) are counting on China to help drive their revenues as they struggle with falling demand in North America and other markets. Ford’s sales in China were up 14% year-over-year in the first five months of 2009. General Motors also notified that its sales in China in the first six months of 2009-soared 38% year-over-year, while it resorted to government aid and was reorganized under court protection for its US operations.
Toyota aims to boost total vehicle sales in China, including imports and models produced in partnership with Tianjin FAW, by 40% to 700,000 units in 2009, while its total production capacity is at 640,000 units. The gap could widen as it plans to achieve total sales of 1 million vehicles in China by 2010 and win a 10% market share.
Recently, Nissan Motor (NSANY) announced a sales target of 570,000 units for China, including both passenger and light commercial vehicles (LCVs) in 2009. Nissan’s sales in China for 2008 were 545,000 units, an increase of 19% versus 2007. Nissan has a strong presence in the Chinese market through its joint venture with Dongfeng Motor Group. Zhengzhou Nissan Motor Co. (ZNA) an assembly joint venture between Nissan Motor and Dongfeng Motor has an LCV plant in Zhengzhou, Henan Province, China .
The company added another LCV plant at the same site, which is expected to begin operations in late 2010. This will bring the total production capacity of the ZNA site to 200,000 units per year by 2010.
Honda Motors‘ (HMC) production in China was down 4.3% year over year during the first three months of 2009. The company reported a drop of 67.5% in sales in Asia for the same period 2009.
As per media reports, sales in China are expected to exceed 11 million units in 2009. Total sales in China in 2008 were 9.4 million vehicles of which 6.8 million were passenger cars and 2.6 million were commercial vehicles.
Read the full analyst report on “F”
Read the full analyst report on “GMGMQ”
Read the full analyst report on “TM”
Read the full analyst report on “NSANY”
Read the full analyst report on “HMC”
Zacks Investment Research
