Analysts: China may have surpassed U.S. in Jan. auto sales

Special Report:Global Financial Crisis

BEIJING, Feb.6 -- China may have surpassed the

United States to become the world's largest auto market based on monthly sales

in January, according to analysts and forecasts.

General Motors, the leading U.S. automaker, estimates

that China sold about 790,000 vehicles last month.

While car sales in China have slowed lately, they

haven't plummeted like in the U.S., where January sales tumbled 37 percent from

a year ago to 656,976 vehicles - a 26-year low.

"This is the first time in history that China has

passed the United States in monthly sales," Mike DiGiovanni, General Motors'

executive director of global markets and industry analysis, said in a conference

call late Tuesday.

DiGiovanni projects that Chinese auto sales could hit

10.7 million vehicles this year, nearly a million units more than his estimate

of 9.8 million unit sales in the U.S. for the same period.

The official Chinese car sales figures are yet to be

published, but analysts say the GM estimate is close to de facto sales.

"Although it is too early to conclude based on the

monthly figure that China has become the world's largest auto market, it is

definitely the world's only major auto market with strong potential," said Yale

Zhang, a Shanghai-based auto analyst.

China outpaced Japan to become the world's No 2

vehicle market in 2006. Although auto sales have slowed in recent months,

analysts say China has great growth potential in the long term given strong

domestic demand and recent government policies.

The government passed a stimulus package for the auto

sector last month, reducing the purchase tax on vehicles with engine capacity of

less than 1.6 liters by half to 5 percent.

It is also spending 5 billion yuan (730 million U.S.

dollars) on subsidies to farmers replacing three-wheeled vehicles or outdated

trucks with small, 1.3-liter or less, vehicles.

The push is to promote more energy efficient vehicles

while improving the competitiveness of the country's highly fragmented auto

industry. About 10 billion yuan is going into upgrading automakers' technology

and developing alternative energy vehicles.

"The purchase tax cut is the most effective tool the

Chinese government has adopted for market recovery," said Ricon Xia, auto

analyst at Daiwa Securities. The tax adjustment is expected to boost auto sales

in China this year by 3-6 percent, he said.

(Source: China Daily)