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Passenger automobile sales fall in April, as inventories continue to grow

Chinese passenger automobile sales last month totaled 1.27 million units, reported today. Although the figures, which were collected by the China Association of Automobile Manufacturers and China Passenger Car Association, represent positive year-on-year growth of 12.46 percent, they are still 12.46 percent lower than March's results, signifying that the current downward trend in the market has yet to reside.

According to CPCA statistics, reported passenger automobile sales in the month totaled 1.28 million units, growing 12.6 percent from last April but decreasing 8.2 percent from the previous month, March. CAAM statistics show that over five million passenger automobiles have been sold in the country in the first four months of the year, only slightly more than the amount sold from January to April of 2011.

CPCA General Secretary Rao Da attributes the sales drop from March to the fact that April only had 19 working days. However, he adds that several manufacturers were overly optimistic of how the market would perform this month, allowing inventories to reach record levels. Due to the introduction of several new models, dealer inventories in April exceeded 100,000 vehicles.

In a presentation made yesterday, CAAM Deputy General Secretary Yao Jie discouraged the introduction of any new policies aimed at curbing automobile sales in China. According to Mr. Yao, policies like the ones implemented in Beijing to restrict automobile purchases, as well as large fluctuations in material prices, have had a negative effect on the natural development of the automobile market.

However, due to decreasing growth in the export and property industries, Mr. Rao believes that no policies hindering automobile sales will be introduced this year. He also maintains that the double digit year-on-year growth rates for passenger automobiles in March and April are signs that the market is beginning to recover. Mr. Rao forecasts that overall growth in the market this year will be at least seven percent, with passenger automobile sales growing ten percent or more.

Own brand manufacturers continued to lag behind their joint venture rivals in April. Monthly sales of own brand passenger automobiles totaled 519,900 vehicles, increasing 5.12 percent from last April and falling 13.85 percent from March. Own brands occupied 40.75 percent of the passenger automobile market. Their market share was 2.36 percent lower than March and 2.84 percent lower than last April.

Despite their poor performance, Mr. Rao believes that own brands are beginning to make a resurgence. Domestic manufacturers currently employ 60,000 research and development staff, three times the amount JVs employ. On average, four percent of business returns are directed towards R&D in own brand manufacturers, compared to 1.3 percent for JVs. In his presentation, Mr. Yao advocated decreasing interest rates on loans for manufacturers in order to help them better cope with financial pressure.