Vehicle sales in China continued to cool in May from the previous month, in contrast to the hot Beijing International Motor Show, which closes today.

Total sales of domestically-made vehicles dropped by 20.43 percent month-on-month to 396,200 units in May, statistics from the China Association of Automobile Manufacturers (CAAM) show.

This is the second consecutive slow down in two months. Sales declined by 8.24 percent in April from March.

Sales of trucks tumbled by 25.22 percent to 115,000 units in May, the biggest decrease among the three main categories of vehicles, according to statistics.

Sales of passenger cars and buses amounted to 177,700 units and 103,500 units last month, down 19.27 percent and 16.55 percent from April respectively.

"The comedown was mainly generated by the week-long Labor Day holiday, the government's tightening economic measures and price wars in the domestic car market," said Zhu Yiping, a spokeswoman for CAAM.

The government controls on fixed asset investment have affected truck sales heavily, Zhu said.

Price wars between producers and government policies, such as controls on car loans by banks, are the two biggest factors curbing car sales, said Jia Xinguang, chief analyst with the China National Automotive Industry Consulting and Development Corp.

"Price cuts are so frequent that many customers expect further declines and have postponed buying cars," Jia said.

Earlier this month, Nissan's joint venture with Dongfeng Motor Corp cut prices of the Bluebird and Sunny sedans by up to 20,000 yuan (US$2,410).

General Motors' joint venture in Shanghai last month slashed prices of the Buick Regal and Excelle sedans by 20,000-40,000 yuan (US$2,410-4,820).

"The market conditions will possibly be tougher at the end of this year thanks to China's removal of quota and further tariff cuts on auto imports next year," Jia said.

The nation will slash tariffs to 30 percent next year from 34.2-37.6 percent this year, in line with its commitments to the World Trade Organization.

The tariffs will be further declined to 25 percent at the middle of 2006.

"We could not expect the domestic car market to continue to grow at the explosive rate seen in the past two years," said Miao Wei, president of Dongfeng.

"Customers have more choices (with more new product launches). It's an pressing task for manufacturers to study their demands to make them faithful to our brands."

However, Zhu said vehicle sales are expected to rebound from June.

"Conditions will be better in the second half of this year and our forecasts on vehicle output for the full year could be exceeded," she said.

CAAM predicted at the beginning of this year that the full-year vehicle output will reach 5.5 to 5.62 million units, up from 4.44 million units last year.

Total vehicle output in China increased by 28.09 percent year-on-year to 2.26 million units during the first five months of this year, statistics show.

Total sales of China-made vehicles reached 2.17 million units between January and May, up 27.57 percent from a year ago.

Passenger car sales grew by 37.68 percent year-on-year to 964,700 units during the first five months of this year.

First Automotive Works Corp (FAW), China's No 1 automaker, sold 378,900 vehicles during the period, up 14.52 percent.

Combined sales of the nation's top five automakers - FAW, Dongfeng, Shanghai Automotive Industry Corp, Chang'an Motor Corp and Beijing Automotive Industry Holdings Corp - reached 1.42 million units during the period, accounting for 65.17 percent of total vehicle sales.

The proportation was down from 65.21 percent in the first four months of this year.

(China Daily June 16, 2004)