May 9, 2012 / 8:05 AM / 5 years ago

UPDATE 1-China car sales rise 12.5 pct in April

* Sales growth doubles from 4.5 pct March pace

* Demand expected to remain solid in May, June

* New models from autoshow to attract buyers

* Single-digit sales growth expected for 2012

* Market expected to hit 30 million by 2020-Ford

By Fang Yan and Ken Wills

BEIJING, May 9 (Reuters) - Car sales in China rose 12.5 percent in April from a year earlier, more than double the modest pace in March as consumers trickled back to the showrooms ahead of the Labour Day holiday.

Demand will likely remain solid in May and June as new models that premiered at the Beijing autoshow start to arrive at the showrooms, industry observers said. After that, a more subdued growth pattern, which began after Beijing's policy incentives expired, is likely to carry through the rest of the summer, the slowest auto selling season of the year.

Many industry executives expect the once red-hot demand in China to register single-digit growth rates for a second year in a row, the slowest back-to-back years since the market first took off in the late 1990s.

General Motors, whose joint ventures with local Chinese automakers such as SAIC Motor Corp are key players, expects China's overall vehicle market to grow between 5 percent and 10 percent this year.

Following a "quieter" summer period, Kevin Wale, head of GM's China operations, said he is "actually bullish about the back half of the year."

"Some people are holding off buying," but showroom traffic is "still very strong" in the market, Wale said in a telephone interview with Reuters on Wednesday. "When traffic is strong, that means there's underlying demand. The economy is still okay, the government is loosening credit, making money available for people," he said.

Dave Schoch, head of Ford Motor China operations, said the Chinese auto market is headed for a period of slower but sustainable growth after growing leaps and bounds since the late 1990s.

"There may be monthly ebbs and flows of the total Chinese auto market, but we see sustained positive momentum and growth of about 5 percent per year for the foreseeable future," the Shanghai-based Ford executive said in a statement made available to Reuters. "Today's 18.5 million market is expected by many to be around 30 million by 2020."

China's car market cooled to a 5.2 percent gain last year, after jumping 53 percent in 2009 and 33 percent in 2010.

The slowdown has been attributed to a raft of factors, from the end of tax incentives for small cars to authorities' efforts to combat traffic congestion in major cities such as Beijing.

In April, a total of 1.28 million sedans, SUVs, MPVs and minivans were sold in the country, the China Association of Automobile Manufacturers (CAAM) said on Wednesday. In the same month of 2011, that number was 1.14 million.

In the first four months of the year, deliveries climbed 1.9 percent to 5.05 million, stemming a downtrend that started in January when automakers and dealers cut working hours during China's long Lunar New Year holiday.

In the United States, auto sales rose 2.3 percent in April from a year ago, helped by strong gains at Toyota Motor Corp and Chrysler Group LLC, as American shoppers replaced aging cars and trucks and as the broader U.S. economy showed signs of strength.

Automobile sales in Japan, excluding 660cc mini vehicles, rose 92 percent in April from a year earlier to 208,977 vehicles.


The weaker-than-expected sales growth so far this year - far below CAAM's projection of 9.5 percent for 2012 - was blamed on China's slowing economy and higher fuel prices, which have persuaded many consumers to tighten their purse strings.

Still, many foreign executives remain committed to their expansion plans in China where per-capita car ownership remains low compared to mature markets.

Nissan Motor is aiming to boost its annual output capacity in the country by two-thirds to 2 million vehicles by the end of 2015 and its market share to 10 percent from 7.4 percent.

GM, which continues to beat the market with an 11.7 percent gain, is adding 600 dealerships in China to bring the total to 3,500 by the end of the year. It is also committed to adding one new Cadillac model in China each year through 2016.

"It's true that the breakneck growth in 2009 and 2010 may never repeat again and traffic in big cities is too crowded already, but there is still lots of growth potential in lower-tier cities where many people have yet to buy their first car," said Sheng Ye, associate research director for Greater China at industry consultancy Ipsos.

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