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China car sales jump 'beyond imagination'

(Agencies)
Updated: 2009-06-11 14:22

Honda's two ventures in China have been running with three shifts because of demand for models including City cars and CR-Vs, the bestselling SUV in China. Still, the company hasn't yet decided to expand capacity on concerns demand may not be sustainable, said Zhu Linjie, a Beijing-based Honda spokesman.

The tax cuts and subsidies may have caused a short-term sales surge that will fade over the coming months, said Ricon Xia, a Daiwa Institute of Research (HK) analyst in Shanghai. Both stimulus measures are due to expire at the end of the year.

"It is not yet clear how demand will go in the second half," Xia said.

In May, passenger-vehicle sales surged 47 percent from a year earlier, the most since February 2006.

Parts Logjam

The biggest logjam for Chinese automakers seeking to raise production is a shortage of parts, particularly more complex components, such as automatic gearboxes, generally imported from overseas. These are in short supply as plunging auto sales in the US, Europe and Japan, coupled with the collapse of GM, has forced partsmakers into bankruptcy.

Special coverage:  Global Auto Industry Woes Related readings:  Senators concerned by US car dealership closures  GM to cut 14 plants by 2012, reaffirming to build small car in US  British incentive program hopes to spur new car sales  Hybrid car owners seek subsidies  Ford China venture car sales up 33% in April

"Component-makers going out of business is causing headaches for carmakers in China," said Qin Xuwen, a senior analyst at Orient Securities Co. in Shanghai. "It will take a couple of months to fix this."

To safeguard future supplies, Chinese companies are buying overseas partsmakers. BeijingWest Industries Co. in March agreed to acquire the remaining global suspension and brake businesses of Delphi Corp., the bankrupt former GM parts units. The same month, Geely Holding Group Co., China’s biggest private automaker, agreed to buy Drivetrain Systems International, an Australian gearbox-maker that was in receivership.

Such deals may help boost Chinese vehicles supplies in the long run. For now though, drivers may have to continue waiting.

"People are lining up for cars, and vehicles are going out of stock," Zhao said. "Who could have expected that last year?"

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