Car sales in China dipped 0.1% in May from a year earlier, marking the first decline in more than two years amid a steep slowdown in the world's biggest auto market.
After two straight years of frantic expansion, car sales in the country settled into a subdued growth pattern at the beginning of 2011, with year-to-date sales up merely 6.1%, a fraction of a 63.6% jump in 2010.
The market may continue to go south in the summer months, a traditional slack auto sales season, followed by a moderate rebound in autumn, industry observers say.
"June and July have never been the best months for auto sales and flat growth would be the best scenario this year. Demand may pick up a bit in autumn, but it's unlikely to be anything close to the surge in 2009 and 2010," said Jenny Gu, J.D. Power's senior market analyst based in Shanghai.
September and October are the so-called "gold and silver" months for auto dealers, a time when those hoping to get behind the wheels at the best leisure travel season of the year typically flock to showrooms.
At a Chevrolet dealer in Shanghai, sales have been lukewarm despite market expectations of a cut-back on Beijing's 3,000 yuan (about USD 460) subsidies for buyers of fuel-efficient cars.
"Sales are much slower now than a year earlier; we would be very happy if we can move over 150 cars every month," Meng Yi, a sales manager told Reuters, adding the monthly tally in the past could easily top 200 or even 300 units.
"People don't seem to care about whether the 3,000 yuan handouts will be there or not next month as the government had already stripped away most of the other subsidies at the end of 2010."
Industry observers are divided over the market outlook for the rest of the year. Optimists still expect the market to finish the year with a positive note, but pessimists predict a decline of as much as 10%.
In a research note issued late last month, AlixPartners forecast annual growth of up to 15% for light vehicle sales in China between now and 2016, thanks to growing wealth of urban households.
In April, nationwide sales of sedans, sport utility vehicles and multi-purpose vehicles came to 1.04 million units, compared with 1.14 million a year earlier, according to data released on Thursday by the China Association of Automobile Manufacturers (CAAM).
Overall vehicle sales in the month, including trucks and buses, fell 3.98% from year earlier to 1.38 million units.
In the United States, car sales sputtered in May, slumping to levels that were much lower than expected, as higher vehicle prices led consumers to put off purchases in the face of a weakening economy.
In Japan, auto sales fell by a third in May, the lowest total for the month since 1968, as car makers struggled to restart production after the earthquake and tsunami that roiled the country in March.
WITHDRAWAL OF SUBSIDIESIn 2009, Beijing had introduced tax incentives for small cars and handed out subsidies for farmers who traded in old, gas-guzzling vehicles for more fuel-efficient ones, a move that helped China eclipse the United States as the world's top auto market.
The government scaled back the package in 2010 and scrapped the package completely at the end of last year to steer the market to a slower but hopefully more sustainable growth pattern.
The pullback was instant. The country's once-sizzling auto sales have cooled down significantly since the beginning of the year, after expanding 33.2% and 52.9%, respectively, in 2010 and 2009.
Makers of pickup trucks and mini-vans, including General Motors' venture in southern China, were hit hardest as farmers were no longer motivated to buy them without government subsidies.
In May, sales of GM-SAIC-Wuling fell 10.8% from a year earlier, pulling down GM's overall China sales growth to negative territory for the second month in a row.
Japanese players, suffering from production disruptions in the aftermath of the devastating earthquake and tsunami, continue to report weak China sales.
Toyota Motor's May China sales tumbled 35%, with sales of Honda Motor down 31.9%.
Bucking the trend, Ford Motor moved 14% more vehicles to its China dealers in May.
Beijing started handing out 3,000 yuan rebates to buyers of fuel-efficient cars in June 2010 to help promote the sector, a move projected to cover more than 4 million such vehicles by 2012.
But an unnamed official with China's science and technology ministry was quoted by local media as saying recently that the government may raise the threshold for vehicles that qualify for the subsidies. The official did not elaborate.
($1 = 6.475 Chinese Renminbi)
