China Takes Car Incentives to the Farm to Halt Skid
China’s overheated auto market has just posted another miserable month, with May car sales edging up just 0.3 percent while a broader measure that includes cars, sport utility and multi-purpose vehicles fell 6.1 percent, according to the latest industry figures. (English article) The association that compiles the data is sticking to its previous gloomy forecast, first issued last month, that sales could actually fall for the year after notching red-hot growth in 2009 and more solid gains last year fueled by incentives from Beijing. In a bid to moderate the downslide, Beijing has just announced a new round of incentives that clearly have a rural flavor, perhaps as part of China’s efforts to spread more wealth to its smaller cities and towns. Under that plan, owners of farm vehicles, buses and heavy trucks can all trade in their clunkers for up to $2,800 in subsidies toward the purchase of a new vehicle. (English article) The head of the auto 
association that compiles the monthly sales figures was clearly not impressed by the latest plan to bring some momentum back to the industry, saying vehicle owners could make more by selling their clunkers on the secondary market. I would agree that this program won’t bring the industry roaring back to its previous growth days. But considering the growing importance of owning a car to one’s social stature, combined with the fact that I see little or no secondary market for the kinds of clunkers this program is targeting, I wouldn’t be surprised to see a slight rebound in car sales by the end of the year as rural folk look to hop aboard China’s latest car craze bandwagon. In the end, that should benefit the cheaper homegrown brands like Geely (HKEx: 175), BAIC and Chery.
Bottom line: China’s auto industry will remain sluggish for at least the next year, but a new incentive program aimed at rural buyers could give the market a surprise bounce by year end.
Related postings 相关文章:
◙ Autos: Good Times Screech to a Halt 中国汽车业：当繁荣已成往事
◙ GM’s China Growth Story Stalls Out 通用汽车在华增长势头受挫
◙ China’s Green Auto Dream: A Road Paved with Problems 中国的绿色汽车之梦：前途荆棘密布
