AUTOSHOW-WRAPUP 1-China automakers add capacity as sales rise

* China 2010 auto sales forecasts rising, 20 pct growth seen

* Carmakers building new capacity to tap demand

* Govt could end incentives in 2011 – researcher

By Fang Yan and Doug Young

BEIJING, April 22 (BestGrowthStock) – Chinese auto sales are set to
grow faster than expected this year, with some industry
insiders now picking growth of 20 percent in the world’s
largest car market, raising talk Beijing will cut incentives to
cool growth.

China’s car sales zoomed nearly 50 percent last year,
defying falling sales in the rest of the world, thanks in part
to a series of government measures designed to stimulate
spending during the global downturn.

Sales have continued to show strong growth this year, up 76
percent in the first three months, according to government
data.

Industry watchers were initially predicting 10-15 percent
growth for this year, but many have started revising those
expectation upwards.

BYD (1211.HK: ), China’s eighth largest car maker, is now
expecting China’s auto sales to grow by about 20 percent this
year, said Henry Li, general manager of the company’s export
division.

Li was talking on the sidelines of an industry forum just
before the start of this year’s Beijing auto show, China’s
largest and the first held since it surpassed the United States
last year to become the world’s largest auto market.

Most of the world’s top auto makers, including GM [GM.UL],
Ford (F.N: ), Toyota (7203.T: ) and Volkswagen (VOWG_p.DE: ), will
attend, alongside China’s own field of increasingly muscular
names like SAIC Motor (600104.SS: ), BYD and Geely Automobile
(0175.HK: ).

Li attributed his bullish forecast for this year to
especially strong demand in China’s smaller cities, which he
expects will continue for the next five years.

BYD, formerly known for its cellphone batteries, has come
from nowhere to become one of China’s top selling automakers,
selling nearly 450,000 vehicles last year, up 162 percent. Its
F3 was the nation’s best selling vehicle model.

CIMB-GK analyst Rebecca Tang said she also revised her
growth forecast to 20 percent from 15 percent earlier this
month after the strong start to the year.

“The major concern is a slowdown in demand,” she said.
“More capacity will come next year, and that could raise a
concern about overcapacity by then.”
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For FACTBOX on China automakers’ 2009 sales:
[ID:nTOE63L06F]
For graphic on top China models:
http://link.reuters.com/cuz68j
For more from Beijing Auto show:
[ID:nSGE63K0EL]
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BUILDING CAPACITY

Other automakers were also racing to increase capacity as
China’s market shows no signs of slowing yet.

Beijing Automotive Industry Holding Corp (BAIC), China’s
No. 5 automaker, and partner Hyundai Motor (005380.KS: ), will
build their third manufacturing plant in China, BAIC’s
President Wang Dazong said at the industry forum.
[ID:nTST000106]

He added that BAIC was also building a new plant to make
vehicles using technology it recently acquired from GM’s
[GM.UL] money-losing Saab unit.

BYD, part owned by Warren Buffett’s Berkshire Hathaway
(BRKa.N: ), was getting ready to take its own show on the road,
setting up a sales network in the United States as it prepares
to sell its electric e6 vehicle there later this year.
[ID:nTOE63L05W]

But rapidly rising car sales may have Beijing reconsidering
its incentives amid concerns that the sector might be adding
too much capacity too quickly and becoming in danger of
overheating.

A leading government researcher concurred that China car
sales should grow about 20 percent this year, which may prompt
the central government to reconsider its tax incentive
policies.

If such strong growth continues, Beijing may scrap tax
incentives for small cars next year, Xu Changming, director of
the information resource department of the State Information
Centre, said at the forum.

“The market was so good last year,” Xu said. “Actually
growth last year was destructive for automakers and not good,”
he said, adding more moderate growth over 10 percent is
considered healthy. [ID:nTOE63L03L]

CIMB-GK’s Tang said she wasn’t too concerned about an end
to incentives.

“The government may end tax incentives next year, but it
should have limited impact on the market,” she said.

Penny Stocks

(Additional reporting by Michael Wei in Beijing and Alison
Leung in Hong Kong; Editing by Lincoln Feast)

AUTOSHOW-WRAPUP 1-China automakers add capacity as sales rise