UPDATE 1-China Nov car sales up 29 pct, 2011 outlook dims

Thu Dec 9, 2010 4:07am EST

Related Topics

* Nov sales stronger than expected due to policy incentives

* Demand to say strong in Dec for same reason

* Market to slow in 2011 as incentives expire

* Toyota Nov sales up 17 pct, reversing 6 pct fall in Oct (Adds analyst comments, market outlook, graphics, details)

By Fang Yan and Ken Wills

BEIJING, Dec 9 (Reuters) - Automakers in China shipped 29.3 percent more passenger cars to dealers in November, extending a rebound that began in August as people rushed to showrooms before incentives expire at the end of the year.

Demand would remain strong in December, industry observers say, bolstered in part by aggressive year-end marketing campaigns by automakers, but they predicted the market would slow sharply in 2011.

"November sales are much stronger than what we had expected. But it's abnormal and cannot last," said John Zeng, an analyst with J.D. Power Asia Pacific.

"People just want to take advantage of the incentive before it's too late. That does not bode well for next year especially for the small-car segment, which has enjoyed a bull run thanks to the sales tax cut."

Beijing unveiled tax incentives in 2009 for cars with engine sizes of 1.6 litres or smaller, a move that helped China surpass the United States as the world's largest auto market that year.

The incentives had been scaled back since January this year to get the market prepared for a phase-out starting from 2011, industry insiders have said.

Earlier this week, a local newspaper reported that China will scrap both the tax incentives and a 3,000 yuan rebate for fuel efficient models in 2011. [ID:nTOE6B5028]

Drivers in Beijing may also be subject to congestion fees and non-Beijing residents must own an apartment and get a parking permit before they are allowed to buy a vehicle, as part of government initiatives to tackle the city's worsening pollution and traffic gridlock. [ID:nTOE6B8036].

A total of 1.33 million sedans, sport utility vehicles and multi-purpose vehicles were sold in November, the China Association of Automobile Manufacturers (CAAM) said on Thursday.

That compared with 1.2 million wholesale car sales in October, up 27.1 percent from a year earlier, the strongest monthly gain since April, according to official data. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a Graphic on monthly China car sales:

link.reuters.com/rys39q

For a Graphic on top sales of automakers"

link.reuters.com/qym39q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Ford Motor (F.N) was a winner last month, outperforming the market with a 35 percent annual sales increase. Toyota Motor (7203.T) reported a 17 percent sales gain, reversing a 6 percent fall in October, thanks in part to the launch of its new Corolla sedan made at its venture with FAW Group.

General Motors (GM.N), the biggest overseas automaker in China, sold 11.2 percent more vehicles in the country in the month over a year ago, compared with a 19.6 gain in October. Sales of Geely Automobile Holdings (0175.HK) rose 24.5 percent last month, down from a 37.2 percent rise in October. [ID:nTOE6B6047]

SLOWER, RATIONAL GROWTH IN 2011

China has been a major bright spot amid a global industry that is still struggling from a steeper-than-expected downturn in 2009.

However, break-neck market expansion has started to taper off since the second quarter as Beijing presses the brakes to keep the economy from overheating.

A mild recovery since August merely reflects the cyclical nature of the business, and many senior industry executives, including Kevin Wale, president and managing director for GM China operations, expect auto sales to return to a slower, but more rational growth rate of 10-15 percent in 2011. [ID:nTOE68G01Z]

Joe Hinrichs, president for Ford's (F.N) Asia and Africa operations, and several other senior industry executives shared the view. [ID:nTOE6AN08D]

Scrapping policy incentives and the Beijing city government's expected severe measures to tackle congestion will dim prospects for the 2011 market outlook, analysts say.

"Policy incentives played a big role in bolstering auto sales in China, and the absence of them will also have a big impact the other way around," said J.D. Power's Zeng.

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