China reports car sales boom

Car sales are expected to keep booming in China next year as it consolidates its position as the world's largest market.

It overtook the US last year with sales surging 45% to 13.6 million vehicles.

Monthly figures this year have seen double-digit percentage growth and analysts are forecasting sales may climb roughly 30% to about 17 million vehicles for the full year.

Such explosive growth may not continue in 2011 because a tax cut on new vehicle purchases is expected to end. But a rebate on cars with small engines will stay in place, as the government seeks to encourage people to drive more fuel efficient vehicles.

The forecasts came as the country's second major auto show this year opened today in the southern city of Guangzhou.

"We think the fundamentals of growth in China are very strong," said Kevin Wale, president and managing director for GM China, citing an economy that is expected to expand 8% or more annually, high consumer confidence and a global economy that is starting to rebound.

"To be honest, the Chinese have developed a love affair with the car."

Unlike its glitzier cousins in Beijing and Shanghai, which are held in alternating years and are aimed more at establishing China's presence globally with product launches, the Guangzhou show has always been aimed at local buyers.

But car makers are still putting on a show for the tens of thousands of potential buyers expected to pour into the eighth annual Guangzhou International Automobile Exhibition, in bustling Guangdong, one of China's most prosperous provinces. The show, known as Auto Guangzhou, runs until December 27.

By the time 2010 is over, Mr Wale said, GM will have sold about 2.3 million cars in China, while next year sales will climb about 10% to more than 2.5 million.

Other manufacturers at the show were also optimistic that sales next year would be just as good as in 2010, brushing off the effect of the end of the incentives.

"I expect there will be a rush to buy cars before the tax goes up at the end of the year, then an adjustment period and then things go back to normal," said Richard Baker, deputy general manager of Ford's joint venture in China with Chang'an Automobile Group and Mazda.

Ford expects to sell 305,000 vehicles in 2010 through the joint venture, up 32% from a year earlier.

During the financial crisis two years ago, China's government was eager to promote the car industry as a way of boosting China's economy. It succeeded but is now trying to rein in that growth faced with massive pollution and traffic jams.

For many foreign carmakers, China is their best hope as they struggle with weak sales in the US and other developed markets.

Makes from around the world are represented in Guangzhou, ranging from the mass market appeal of Hyundai and Suzuki to prestige offerings from Porsche, Maserati and Aston Martin.