China in push to prop up local carmakers Go back »

2009-01-06 | All chapters

China in push to prop up local carmakers
Patti Waldmeir, Financial Times, 6th January 2009

The Chinese government plans to support the car industry, the second-largest in the world, with the aim of ensuring sales growth of about 10 per cent in 2009.

The move is part of the continuing effort to stimulate the economy and shield the country from the effects of the global economic crisis.

The State Council, China's cabinet, is expected soon to announce cuts in car purchase taxes and incentives for the development of clean fuel cars, to help support the flagging local car market, according to the official Shanghai Securities Journal.

After years of double-digit growth, Chinese passenger car sales fell 12 per cent year on year in November as consumer worries about economic growth sapped demand. Figures for December are expected next week.

The proposed sales tax cut on smaller vehicles could help automakers such as Geely, one of the largest Chinese car companies. Geely said yesterday it expects to boost sales by 25 per cent this year as it introduces new models.

Government bodies will be required to buy cars developed by domestic automakers when making fleet purchases, and Beijing will encourage further consolidation in the domestic car industry, the newspaper said. China has 45 carmakers compared with 15 in the US, the world's largest car market.

Premier Wen Jiabao said last week that Beijing had developed plans to help the automobile and steel sectors.

Yao Hongguang, Shenzhen-based analyst at United Securities, said: “With such a basket of stimulus policies, sales growth in the car market this year can reach 10 per cent, still much lower than the compound growth rate of 15-20 per cent over the past five years.”

But JD Power, the leading auto consultancy, said it was still predicting flat or slightly lower passenger car sales in 2009, at 5.8m units.

This is based on the assumption that the global economy will stabilise in the first quarter of this year, and that China's economic stimulus policies offset negative pressures from overseas – neither of which are guaranteed to happen.

JD Power said in a December report that there was a 40 per cent chance the Chinese market could fall by 10-12 per cent, in spite of government efforts to support the market.

Source: http://www.ftchinese.com/story.php?lang=en&storyid=001024047