UPDATE 2-China car sales growth slows to 14-mth low

* June sales growth up 19.4 pct vs yr ago

* Growth to slow further to 10 percent in H2

* Car sales exceed 1 mln units in 5 out of 6 months

* Labour disputes weigh on Asia auto makers in China
(Adds more quotes from analysts, executives, impact of labour

By Michael Wei and Jacqueline Wong

BEIJING/SHANGHAI, July 9 (BestGrowthStock) – China’s passenger car
sales growth slipped below 20 percent for the first time in 14
months in June, as the impact of government stimulus faded and
labour disputes at auto factories dented production.

The second-half outlook for the world’s biggest auto market
remains challenging as rapid sales growth a year ago makes the
base of comparison much higher and the threat of more
disruptive labour disputes lingers, executives and analysts

“We had expected early on that growth would continue to be
strong in the first few months. But it won’t be one way, and
the market might head south in July and August,” said a senior
executive at state auto group Dongfeng Motor Group Co
(0489.HK: ), who asked not to be identified because he was not
authorised to speak to media.

China’s car market started to take off in April last year
after a dismal 2008, with sales hitting fresh monthly records
for the rest of 2009, thanks to generous government incentives.

The market started to lose some of its steam in the same
month this year, when car sales rose merely a third from a year
earlier. Car sales in May were up 25.8 percent.

Nevertheless, sales volume stayed above the 1 million mark
in five out of the past six months, suggesting solid demand for
cars in a country which is getting increasingly mobile as
national wealth grows.

A total of 1.04 million sedans, vans and sport utility
vehicles were sold in June, compared with the year-ago level of
872,900, the official China Association of Automobile
Manufacturers said on Friday.


For a Graphic on monthly China car sales:

For TABLE on China June auto sales: [ID:nTOE66807I]



“Judging from the figures, the market is still holding up
pretty well so far. It’s just too much of a challenge to match
2009’s run-away market expansion,” said Lin Huaibin, an analyst
with IHS Automotive.

“The growth rate will slow down further in the summer when
auto sales have been slack traditionally. The market could pick
up again in the autumn, when many people get behind the wheel
and travel around with their friends and families.”

Analysts expect car sales in China to climb 10 percent in
the second half, with the full-year gain at a more rational
level of 20 percent, after a 53 percent surge in 2009.

Recurring strikes at auto parts suppliers lately, which had
forced Honda Motor (7287.T: ) and Toyota Motor (7203.T: ) to halt
car production in China, are adding to the woes of a slowing

Honda’s China auto sales fell 10 percent in May, according
to data provided by J.D. Power and Associates. It has yet to
release the sales data for June, while Toyota only managed to
chalk up a single-digit percentage gain in the month.

The strife this week spread to a Honda export-only factory
in China which partially halted production after a few dozen
employees refused to return to work [ID:nTOE66801S]

“If the labour disputes are not tackled properly, they will
come back to haunt them,” said Kevin Chen, president of
Gasgoo.com, a Chinese auto parts trading platform.

Globally, European car makers are braced for a slide in
second half sales as scrappage schemes are phased out, while a
slight tapering-off of U.S. auto sales in June from recent
months also raised doubts about whether the industry’s recovery
is faltering. [ID:nLDE6600S2] [ID:nN30214950]

Indian car sales growth, while still solid, is also
slowing. [ID:nSGE66705T]
(Additional reporting Fang Yan in Shanghai; Editing by Lincoln

UPDATE 2-China car sales growth slows to 14-mth low