Vehicle sales in China, the world's No 3 automobile market, increased by almost 10 per cent in the first half of this year, boosted by a much stronger growth in June, according to an industry organization.

Sales of vehicles built in China totaled 2.79 million units between January and June this year, up 9.35 per cent from a year ago, statistics from the China Association of Automobile Manufacturers showed yesterday.

The growth was double that in the first five months of the year.

In June alone, car sales surged by 35.98 per cent year-on-year to 517,000 units.

Analysts mainly attributed the better-than-expected sales growth to stable prices in the domestic auto market.

"Stable prices represent the biggest reason for the fairly good growth in the first half, especially in the small-and-middle-range car segment," said Yale Zhang, a Shanghai-based manager at the US car industry consultancy CSM Worldwide Corp.

Most small-and-middle-range car buyers use cash, not loans, a strong signal that customers' confidence has recovered thanks to stable prices this year, Zhang said.

According to a survey conducted last month by another consultancy, Automotive Resources Asia Limited in Shanghai, Guangzhou and Beijing, 89 per cent of car dealers reported that consumers had as much or more confidence in the second quarter of this year than the previous quarter. Furthermore, 68 per cent described consumer confidence as a bit higher than in 2004.

Last year, many people in China delayed buying cars because of frequent price cuts by manufacturers.

Qie Xiaogang, an official from the Beijing Asian Games Village Auto Exchange the biggest car exchange in Beijing said: "Manufacturers have to stabilize car prices to rebuild customers' confidence as they are very sensitive about prices."

The average car price in Beijing, Shanghai, Guangzhou, Shenzhen and Wuhan remained almost unchanged in June from that in January this year, according to a survey by Cheshi.com.cn, a Beijing-based website doing online car sales.

For example, the current basic price of the 1.6- litre Elantra sedan, one of the best-selling cars in the country made by Hyundai Motor's joint venture in Beijing, is 108,000 yuan (US$13,000), according to the Beijing Asian Games Village Auto Exchange's website.

Many car manufacturers in China controlled production and added fittings onto their products to stabilize prices in the first half of this year.

Statistics showed sales of passenger vehicles in China, including cars, sport utility vehicles, multi-purpose vehicles and mini vans, amounted to 1.84 million units in the first half of this year, up 10.55 per cent.

Last month, passenger vehicle sales shot up by 48.66 per cent year-on-year to 375,500 units.

Zhang predicted that the growth momentum is expected to continue in the second half, and full-year passenger vehicle sales will grow by 17 to 20 per cent this year.

Better-than-expected growth has led to many manufacturers raising sales targets this year.

Hyundai Motor's joint venture in Beijing last month lifted its sales goal for 2005 to 250,000 units from 200,000 units.

The firm's sales rocketed by 92.6 per cent year-on-year to 108,300 units in the first half of this year.

PSA Peugeot Citroen's joint venture in Central China's Hubei Province also raised sales targets this year by 20,000 units to 135,000 units.

The venture sold 72,500 cars in the first half, jumping by 54 per cent from a year earlier.

However, Qie warned that car makers in China should be prudent and take lessons from last year, otherwise price wars could reoccur in the second half of 2005.

All car makers in China were involved in hot price wars last year to achieve high sales targets, but most of them failed due to customers' wait-and-see attitudes.

Hua Xue, chief executive officer of Cheshi.com.cn, said:"Car prices are likely to drop by bigger margins in the second half than in the first half due to car makers' increased sales targets and many new product offensives."

Major all-new models to be produced by foreign auto giants in China in the second half of this year include the Ford New Focus, the Nissan Tiida hatchback, the Peugeot 206, the Toyota Reiz, the Mercedes-Benz E and C-Class, and the BMW new 3 Series.

Katsumi Nakamura, president of Nissan's joint venture with Dongfeng Motor Corp, recently indicated the average car price in China is still around 20 per cent higher than in the rest of the world.

In the first half of this year, sales of commercial vehicles in China trucks and buses grew by 7.09 per cent to 949,400 units, according to statistics.

Combined sales of the top five Chinese automakers First Automotive Works Corp, Shanghai Automotive Industry Corp, Dongfeng Motor Corp, Chang'an Motor Corp and Beijing Automotive Industry Corp - reached 1.86 million vehicles in the first half of this year, accounting for 66.7 per cent of the nation's total vehicle sales.

The auto association predicted earlier that China's total vehicle demand will grow by 12 per cent to 5.6 million units this year from last year.

(China Daily July 13, 2005)