HONG KONG: Bai Lin is waiting anxious for the delivery of her new car, a Volkswagen New Bora. She ordered the car not because she needs it to travel to her office building which is a 15-minute walk from home, but because it is embarrassing not to have one.

"I have always wanted to have my own car; all my friends are car owners now. It feels weird not having something that everyone else does," the 33-year-old Shenzhen-based marketing manager said. She paid 130,000 yuan for the car with a 1.6 liter engine.

"I have to wait for the delivery a bit longer than usual since I ordered it during the National Day holiday when the show room was flooded with potential buyers," she added, admitting a purchasing tax cut prompted her to follow the crowd to own a car.

Beijing cut consumption tax for vehicles with engines of 1.6 liters or smaller to 5 percent from 10 percent effect from January 20 to December 31 this year.

The tax cut along with stimulus spending has fueled the country's passenger car sales, which vaulted 84 percent in September. Total auto sales jumped 78 percent in the month, according to statistics from the China Association of Automobile Manufacturers.

The sharp sales growth is driving the country's automakers to accelerate their expansion plans. Geely, China's largest privately owned and HK-listed car firm, whose September car sales doubled year-on-year, is committed to launching nine new cars in the next 18 months and up to 42 new models by 2015.

The company's technical director Frank Zhao was quoted by mainland media as saying that Geely will have the capacity to make 2 million cars a year by 2015. That is an astonishing target even by global giant auto makers.

Can Chinese car makers continue to ride the wave of strong demand? Analysts are questioning whether the policy-driven sales growth can be sustained next year as speculation is mounting that the government will withdraw stimulus measures next year.

"Next year is not going to be like this year - car sales will definitely slowdown," said Mao Li, a Shenzhen-based auto analyst at First Shanghai Securities. "When exactly is the government going to cancel those incentives is as yet unknown, but I think the government should prolong the favorable policy, as auto industry is very important to the nation's economic growth."

Qin Xiao, chairman of China Merchants Group and of the Asia Business Council, urged the government to tighten monetary policies citing potential asset bubbles.

He said in a commentary in yesterday's Financial Times that monetary policy should not neglect asset prices. It is therefore urgent that Beijing shift from a loose to a neutral stance.

Jack Yeung, an automobile and components analyst at BNP Paribas, speculated that some adjustment in the vehicle consumption benefit is likely in 2010.

"The government may not withdraw the policy completely, but may provide less incentive," he said.

However, it is worth noting that the sales of vehicles that are not subject to government incentives also recorded double digit growth, Yeung said, indicating benefit withdrawal will not diminish a buying spree completely.

"The demand will drop slightly next year, but will remain strong in the long term thanks to a low penetration ratio," he forecasted, alluding to the mainland's low automobile ownership percentages.

Although the country's big cities are afflicted with serious traffic congestion, on average more than 1,200 new cars hit the roads of Beijing every day. There are only 24 car owners for every 1,000 citizens. That ratio indicates the huge upside potential for the industry when compared to the US, which has an average of 765 vehicles per 1,000 people, and Europe, which has a ratio of about 300 per 1,000 - a scary thought when an offhand decade-old prediction of world-famous Japanese-Canadian scientist David Suzuki is considered - that if China were to industrialize to the same degree as the United States, there would no longer be enough oxygen for all of us.

(HK Edition 10/23/2009 page3)