UPDATE 1-China May car sales solid, govt policy supports

* China car sales remain strong in May helped by policy

* Double-digit car sales growth possible for 2009

* Automakers' bottom lines worrisome if volume growth slows

By Fang Yan and Jacqueline Wong

SHANGHAI, June 9 (Reuters) - China's passenger car sales in May rose 46.83 percent from a year earlier to a near record, the country's official industry association said on Tuesday, as Beijing's policy measures continued to lure buyers to showrooms.

A total of 829,100 cars were sold last month, up from 564,600 a year earlier and shy of an all-time monthly record of 831,000 seen in April, the China Association of Automobile Manufacturers (CAAM) said.

Overall vehicle sales, from trucks to buses, rose 34.02 percent in May to 1.12 million units from a year earlier, the association said, extending a 25 percent gain in April.

Growth of China's auto market, the world's largest, slowed in 2008 to its lowest annual rate in more than a decade as the global financial crisis took its toll.

But it has received a strong boost since February from government policy support measures, including halving the sales tax on cars with a 1.6 litre engine or smaller and rebates for buyers in rural areas.

"It seems that the government's stimulus measures remain a major driver for auto sales in May. Many that had delayed big-ticket item purchases have changed their minds and those with no plans to buy cars are browsing around the showrooms," said Zhang Xin, an analyst with Guotai Junan Securities.

Ford Motor (F.N) expects to grow faster than the overall China market this year, banking in part on policy support to lift sales of its new Fiesta small car rolled out earlier this year.

General Motors GMGMQ.PK, which filed for bankruptcy protection over a week ago, has reported record monthly sales in China since April, helped in part by its Wuling brand mini vans and trucks made at its venture with SAIC Motor Corp (600104.SS).

GM's China chief Kevin Wale has said there are no signs of a slowdown in sales so far and the U.S. automaker may raise its annual sales growth target in the country, currently at between 5 to 10 percent, if June remains a strong month.

EASING OFF?

After witnessing strong China car sales for four straight months, industry executives and analysts are more optimistic about the outlook for the second half.

"It's true that sales could ease off a bit in the summer months when car sales typically slow down anyway," said Chen Qiaoning, an analyst with ABM AMRO TEDA Fund Management.

"But double-digit year-on-year growth is still quite possible as the second half of 2008 was particularly bad."

But automakers' bottom lines are vulnerable as volume growth is being driven by small vehicles with relatively thin margins.

Nineteen out of 61 domestically-listed automakers and parts suppliers posted losses from January to March versus 10 in the same period last year, data from Guotai Junan Securities showed.

"The situation may improve as long as vehicle sales are strong and may stay so for the rest of the year. But what will happen if volume growth starts to slow?" asked Guotai Junan's Zhang. (Additional reporting by Lu Jianxin)