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More cars sold in China than US in January

More cars were sold in China than in the US in January, according to Chinese media - most likely due to a sales boost after the Chinese New Year and a post-Christmas slump in US consumption. Analysts say China could become the auto market leader.


AFP - China overtook the United States as the largest auto market in the world in January, according to data published by Chinese state media on Tuesday.

Analysts said the United States was likely to quickly regain the top spot, but the figures showed China was on track to become the undisputed number one car market much sooner than expected as its population grows wealthier.

A total of 735,500 automobiles were sold in China last month, the official Xinhua news agency reported, citing the China Association of Automobile Manufacturers.

By contrast, 656,976 vehicles were sold in the United States, according to preliminary estimates issued last week by market research firm Autodata.

"China had a strong month and the US probably had its worst month in a long time," Michael Dunne, a Shanghai-based analyst with research firm JD Power said.

Exploding car ownership is one of the most visible manifestations of China's frantic economic development in recent years.

It has been fuelled by the growth of an urban middle class, which may number 100 million or even more, depending on the exact definition.

Despite the strength of China's January sales, they were still down 14.35 percent from a year earlier, Xinhua reported. Sales were down 0.83 percent from December when 741,600 vehicles were sold.

Analysts said January was an unusual month because the Lunar New Year boosts sales in China as the United States sees a post-Christmas drop, and the United States was expected to remain the world's largest market for the full year.

"We're still holding to our forecast that China won't surpass the US this year," Dunne told AFP.

The China Passenger Car Association industry group also remained cautious on the outlook for the rest of the year, saying rebates on fuel efficient cars would help sales in the first quarter but the incentive was unlikely to have a lasting effect.

"The situation in the passenger car market is quite good now but there is no guarantee it will continue through the whole year," the association said in a report last week. "It is too early to be overly optimistic."

The January sales figures show a collapse of US car sales rather than a surge in Chinese demand, said John Zeng, a Shanghai-based analyst with Global Insight.

"More than 80 to 90 percent of US car purchases were made on credit," Zeng said. "Once the financial system got into trouble, the sales model supported by the financial system collapsed."

Growth in China's car sales, which are mostly cash-based, is expected to slow to three to four percent this year due to worsening economic conditions, according to Global Insight.

That's less than half the eight-percent rise in 2008 when 9.4 million units were sold.

As recently as the end of last year, experts' consensus was China would overtake the United States as the world's largest auto market by 2015, but Dunne said the financial crisis' fallout meant it could happen as early as next year.

"I think 2010 is reasonable now," he said. "But things are moving so quickly and people in the current environment are more taken with 'How do I survive?'"

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