BEIJING -- February car sales in China rose 26.5 percent to 1.21 million from a year earlier, the China Association of Automobile Manufacturers (CAAM) said on Friday.
The figure represented a strong rebound from a slump in the previous month, when sales reached 1.16 million cars, as automakers and dealerships resumed normal operations after the lunar new year holidays.
However, sales in the first two months still slipped 4.4 percent to 2.37 million from the year-ago-level, according to CAAM, reflecting the impact of the holidays that sometimes fall in January and sometimes in February.
Analysts cited the holidays as the reason behind a nearly 24 percent fall of the car market in January, the steepest monthly decline in more than two years.
Industry observers typically look at the two-month combined figure to gauge the state of the industry.
A comparatively low year-ago monthly tally of 967,200 cars also pushed up February's growth rate, other analysts noted.
"The first two months aren't that impressive. But we can't jump to the conclusion that demand is starting to fall off," said Sheng Ye, associate research director at industry consultancy Ipsos' Greater China region.
"There is still a lot of untapped potential in third- or fourth-tier cities where many people have yet to buy the first car in their life," Ye said.
China's 15-day Spring Festival holidays marking the lunar new year are the country's most important holiday period, and most companies shut down for about a week so workers can return to their hometowns to celebrate with relatives.
Industry observers expect the market to continue to stabilize in the coming months, thanks to solid demand in smaller cities that are replacing big urban centers in the coastal areas as the major growth catalyst.
Beijing's relentless effort to temper run-away home prices is also seen by some analysts as a positive factor for the auto industry.
"Many home buyers are holding on to their money in anticipation of a bigger fall of property prices," said Jenny Gu, a manager at LMC Automotive's China operations. "If they don't buy new apartments, they buy new cars."
LMC expects passenger car sales to rise nearly 10.9 percent in 2012.
Optimist vs pessimist
Some industry executives, including Chen Hong, president of top Chinese automaker SAIC Motor Corp, and David Schoch, chairman and CEO of Ford Motor's China operations, have a sanguine outlook.
SAIC's Chen expects the market to gain 7-8 percent this year, triple the year-ago level. Ford, which unveiled a $490 million new China plant late last month, is betting the market will gain 5-10 percent annually in the coming years.
"There are tremendous opportunities in China," said Schoch. "I am very comfortable with where we are in terms of matching capacity and demand as we move forward."
Zhang Baolin, president of Chongqing Changan Automobile Co, however, forecasts a moderate climb of 3 percent.
In the United States, car sales rose nearly 16 percent in February and the annual sales rate leapt to its best level in four years, thanks largely to rising consumer confidence and upbeat U.S. economic data.
In Japan, car sales jumped in February as government efforts to revive domestic sales and replenished inventories drew buyers into showrooms.
Counting on China
Global carmakers are counting on a rebound in China to help drive earnings this year, with auto demand in Europe forecast to decline for a fifth straight year as the sovereign debt crisis unsettles consumers.
General Motors Co., the biggest overseas automaker in China, boosted February sales in the country by 30 percent to 240,554 units. Volkswagen AG's luxury unit Audi increased sales last month by 66 percent to 31,352 cars.
Automakers will find "big difficulties" delivering as many cars in China as CAAM projected for this year, Minister of Industry and Information Technology Miao Wei told reporters in Beijing Thursday. The state-backed auto association in January predicted passenger-vehicle sales would rise 9.5 percent in 2012.
Premier Wen this week pared the nation's economic growth target to 7.5 percent from an 8 percent goal in place since 2005, saying that the world's most populous country needs to shift to a more sustainable and efficient economic model.
"China's auto market has entered in a rational adjustment period," said Xu Jianyi, chairman of China FAW Group Corp., which produces vehicles with GM, VW and Toyota Motor Corp. in China. "Local automakers need to focus on improving their competitiveness and efficiency," he said this week at the annual meeting of the legislature.
China will control the increase in auto manufacturing capacity and encourage mergers and reorganizations in the industry, according to Wen's work report, which sets out the administration's priorities. The government earlier removed auto manufacturing from the list of industries in which it encourages foreign investment.
The country will also promote new-energy vehicles and encourage the scrapping of old vehicles to reduce pollution, the nation's top economic planner said in a separate report this week.
The government this year exempted buyers of approved alternative-energy cars from an annual vehicle tax, while fuel-efficient cars are eligible for a 50 percent reduction in the levy. All 412 models approved for purchase by state agencies this year will be limited to Chinese brands, according to a proposal disclosed by the industry ministry.
Public consultation on the list closes today. Foreign brands accounted for nine of the top 10 car models by sales in China last year, led by GM's Buick Excelle with 253,500 vehicles, followed by the 247,500 VW Lavida cars sold.
Sources: Reuters and Bloomberg