China has for the first time topped the US in automobile sales last month, as a series of industry and market support measures adopted by the government have begun to take effect.

In January, China sold 735,500 units of vehicles, 14.35 percent less year-on-year amid falling demand, with a slight drop of 0.83 percent from December, China Association of Automobile Manufacturers (CAAM) said yesterday.

The figure still far surpasses the sales dive in the US where monthly sales plummeted 37 percent from last January to 656,693 vehicles, the worst since 1963.

"The sales figures in January were encouraging. It showed how the new government policies helped boost vehicle buys in China," said Zhu Yiping, Associate Secretary General, CAAM.

While the January sales confirmed the market stagnancy since last year, the high domestic automobile inventories came down after automakers cut production whereas demand exceeded expectations.

Automobile inventories fell more than 80,000 units to hit the lowest point in 13 months, said the association.

China produced 658,800 units of vehicles last month, a 20.22 percent drop compared with a year earlier, but an increase of 5.07 percent over December.

The government passed a stimulus package for the oautonce-thriving auto sector last month, halving the purchase tax on vehicles with engine capacity of less than 1.6 liters, and spending 5 billion yuan on subsidies to farmers for replacing three-wheeled vehicles or outdated trucks with small, 1.3-liter or less, vehicles. The moves were aimed at boosting automobile sales in rural areas and promoting more energy efficient vehicles.

As a result, small passenger cars, with engine capacity of less than 1.6 liters, became the only group with rising sales in passenger car segment in January.

Ricon Xia, auto analyst at Daiwa Securities, expected the tax adjustment to boost automobile sales this year by 3-6 percent.

"Such effective measures must trigger a sales rebound," said Yale Zhang, director, Greater China Vehicle Forecasts for US consultancy CSM Worldwide Corp. He believes China's automobile market is set to pick up in the second half of this year.

However, "it's still too early to conclude anything based on a monthly figure that China has become the world's largest automobile market," added Zhang.

And "we should not be proud of being a month's sales champion. It's not reliable and reasonable to compare China auto industry's capacity with the US' by a monthly figure. Currently, the industry should pay more attention and efforts to carry out a detailed restructured plan as a long-term perspective," said Jia Xinguang, an auto analyst based in Beijing.

(China Daily February 11, 2009)