Both vehicle output and sales in China jumped by more than one-third in the first quarter of this year from a year ago, mainly because of robust demand for cars, an industry association said yesterday.

 

The nation's first-quarter vehicle output reached 1.78 million units, up 36.3 percent, according to statistics from the China Association of Automobile Manufacturers.

 

Sales of domestically made vehicles rose by 36.9 percent year-on-year to 1.73 million units from January to March this year.

 

Both vehicle output and sales in March alone hit an all-time monthly record of 732,800 and 721,500 units respectively, up 28.5 percent and 23.9 percent from a year earlier.

 

The auto association said that the stronger-than-expected growth in the first quarter mainly resulted from very buoyant demand for passenger vehicles, especially cars.

 

Output and sales of passenger vehicles, including cars, sport utility vehicles (SUVs), multi-purpose vehicles and mini vans, surged by 54 percent and 54.3 percent to 1.27 million and 1.25 million units in the first three months from the corresponding period in 2005, according to statistics.

 

Car sales in the first quarter of this year shot up by two-thirds to 855,300 units.

 

"The strong car sales was propelled by flourishing demand for low-emission cars as a result of the government's removal of limitations on them and rising fuel prices," Zhu Yiping, the auto association's spokesperson, told China Daily yesterday.

 

Statistics show that sales of cars with engine capacity between 1 and 1.6 liters more than doubled to 533,000 units from January to March this year.

 

In January, the central government issued a notice urging local authorities to eliminate all kinds of restrictions on the use of low-emission cars. Many Chinese cities, such as Beijing and Shanghai, have followed the call.

 

Last month, regulators raised the wholesale prices of gasoline in China by 5 percent to 300 yuan (US$37) per ton, representing the fifth hike of its kind since last March.

 

Song Bingshen, an auto analyst with China Securities Co Ltd based in Beijing, said that another important reason for the auto sector's resounding growth was the very weak performance in the first quarter of 2005.

 

"Overall growth this year will not be as fast as the pace seen in the first quarter," Song said.

 

He predicted that China's total vehicle sales would rise by 15 percent this year from 5.7 million units in 2005 with car sakes expanding by 20 percent.

 

The auto association's Zhu said that SUV sales saw a big boost in March this year because of the government's new auto consumption tax scheme, raising charges on vehicles with an engine capacity larger than 2 liters to 9-20 percent from 8 percent. The new tax policy, announced three weeks ago, took effect on April 1.

 

"Many people bought SUVs ahead of their schedules in anticipation of price hikes for SUVs following the new tax policy," she said.

 

First-quarter sales of made-in-China SUVs rocketed by 81.1 percent to 62,900 units with 32,400 units sold in March.

 

In the commercial vehicle area, including trucks and buses, combined output and sales climbed by 6.1 percent and 5.8 percent to 513,900 and 482,300 units respectively in the first three months from the same period last year, according to statistics.

 

Partly due to the rapid growth of vehicle sales, China's auto sector has seen an increase in profits this year after falls during the previous two years.

 

Statistics from the auto association show the sector reported 8.1 billion yuan (US$1 billion) in profits in the first two months of this year, up 129.8 percent from a year ago.

 

Profits of the automobile manufacturing segment surged by 329.5 percent to 4.1 billion yuan (US$506 million) in the period.

 

Song from China Securities believes the entire auto sector's profits would gain 10 percent this year from 2005.

 

Last year, the sector's profits dipped by a quarter from 2004.

 

(China Daily April 12, 2006)