September light vehicle sales surge 75 percent

China's light vehicle market has achieved more in the first nine months of 2009 than all of 2008. Driven by another record-setting month in September, year-to-date sales of passenger vehicles and light commercial vehicles (less than 6-tons) topped 9.1 million units, while the 12-month total for 2008 reached only 8.77 million units.

Sales in September totaled 1.26 million units, up a startling 75 percent year-on-year. Both passenger vehicle and light commercial vehicles achieved similar growth rates, with cars up by 76 percent to 867,000 units and light vehicles up by 73 percent to 395,000 units.

Considering seasonal differences, September sales indicate a full year sales of 14.9 million light vehicles. September marks the sixth straight monthly rise in the seasonally adjusted annual sales rate and the third consecutive month above 14 million units.

Recently released economic data confirms that China is set to become the world's largest market for new light vehicles this year.

China's GDP growth in the third quarter of 8.9 percent meets the expectation of policymakers. Confidence is growing that China will achieve the full-year target growth rate of 8 percent. The decline in exports finally began to ease in September. Industrial output continues a V-shaped recovery, supported by strong investment and retail sales. Importantly, foreign direct investment is again accelerating.

Another positive indicator for China's economy is the upturn in medium and heavy-duty commercial vehicles. Offering a window into economic activity and the confidence of business owners, strong commercial vehicles sales in September turned year-to-date sales from negative to positive.

Registration data shows that passenger vehicles sales grew the fastest in inner provinces such as Sichuan, Henan, Shaanxi, Jiangxi and Gansu. Demand in developing provinces has been stimulated largely by government policy and supported by booming growth this year.

Many listed automakers are projecting strong profits for the third quarter, including SAIC, Chang'an Auto and BYD. Manufacturers maintain high expectations for the fourth quarter, pointing to uncertainty in government incentives beyond the fourth quarter. New purchase intenders that want to take advantage of the tax incentive will likely try to execute their purchase this year.

Looking ahead to government incentives in 2010, there is an early indication that the government will add a scrap incentive program next year. With discussion continuing on extending or redefining the tax incentive for small engine vehicles, expectations are rising that the government will continue to encourage auto consumption. The industry support will not likely be stopped suddenly, but rather extended or replaced with new programs.

With expectations the government will continue to encourage automotive consumption, our optimism at JD Power Asia Pacific for 2010 has further improved. We have increased our forecast growth rate for passenger vehicles to 4.6 percent, representing a market of 8.8 million units. For light commercial vehicles, we still expect a 3.3 percent decline in 2010.

The author is a senior market analyst from JD Power Consulting (Shanghai ) Co Ltd

(China Daily 10/26/2009 page7)