UPDATE 4-China car sales growth set to slow after record 2010

* China top auto market in 2010, sales rise 33 pct vs 2009

* Dec sales up 18.6 pct, small cars out of stock on policy change

* Sales may fall in early 2011, full-yr growth seen at 10-15 pct

* Limits in car registration, fuel prices seen unfavorable

* GM, VW lead, Ford growth fastest, BYD fails to meet target

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By Fang Yan and Ken Wills

BEIJING, Jan 10 (BestGrowthStock) – Auto sales in China are set to cool
in 2011 after surging by a third to a record high in 2010 as rising fuel
prices, the removal of subsidies and tighter rules on new car registrations
temper demand in the world’s largest car market.

In December alone, automakers in the country shipped 1.3 million sedans,
sport utility vehicles and multi-purpose vehicles to dealers, but they still
couldn’t keep up with demand.

“Small cars were selling like hot cakes in recent weeks as people wanted
to take advantage of the incentives before it was too late,” said Meng Yi, a
Chevrolet dealer based in Shanghai.

“Instead of getting any year-end bargain deals, people were actually
paying full price upfront and getting the cars months later as many models
were out of stock a while ago.”

Beijing issued a massive package of stimulus measures at the height of the
global financial crisis in 2009, including tax incentives for cars with engine
sizes 1.6 litres or smaller and rebates for farmers who traded in old vehicles
for fuel-efficient models.

The incentives were scaled back in 2010 and mostly scrapped this year.

“Monthly sales will most likely fall in the first half because small cars
account for 60 percent of the market volume. The impact on the mini vehicle
segment can’t be ignored now that they’ve taken away the subsidies,” said John
Zeng, an analyst with J.D. Power Asia Pacific.

The Beijing city government’s recent move to impose quotas on new car
registrations and possible similar moves by other big cities to tackle traffic
gridlock as well as further hikes in fuel prices will also apply the brakes to
the market, industry observers said.

Still, industry insiders say car sales in China will continue to grow for
the full year because of rising income levels and the low level of car
ownership in small, inland areas.
In 2010, a total of 13.8 million passenger cars were sold in China,
the China Association of Automobile Manufacturers (CAAM) said on Monday.
Overall vehicles, including trucks and buses, came to 18.1 million
units during the period, up 32.4 percent, it said.
By comparison,, U.S. auto sales rose more than 11 percent in
2010 to nearly 11.6 million vehicles, snapping a four-year slide that had
forced two of Detroit’s Big Three automakers into government-directed
bankruptcies. [ID:nN04134889]

WINNERS AND LOSERS

Local brands will bear the brunt of policy change, especially the
termination of tax incentives, as they dominate the small car segment,
analysts say. Mid-size cars, mostly carrying a foreign brand, might get a lift
as compact cars are less appealing now without the incentives.

Models which had disappeared from the top ten best sellers’ list in 2010,
such as Toyota Motor’s Camry, could make a come-back next year,
analysts say.

Of all the foreign automakers operating in China, General Motors ,
remains the industry champion with an annual tally of 2.4 million cars and
light commercial vehicles.

Close rival Volkswagen , which makes only cars in the country,
sold 1.9 million units, including almost 228,000 Audi brand models.

Hyundai Motor and partner Kia Motor moved about 1
million vehicles, as did Japan’s Nissan Motor .

Sales of Ford Motor , a relatively late comer to China, jumped 40
percent, the fastest among all foreign automakers.

“Ford seemed to be rather cautious in the past. But it was very aggressive
last year and added 100 or so new dealers in the country,” said Sheng Ye,
associate research director for Ipsos’ Greater China region.

Despite making the best-selling F3 model, BYD , backed by U.S.
billionaire Warren Buffett, missed its sales target. [ID:nTOE6BI00Q]

Toyota Motor and Honda Motor , hurt by recurring labour disputes
at their suppliers, reported a 19 percent and 12.2 percent gain respectively.
Massive global recalls also tarnished Toyota’s once impeccable reputation for
quality and hurt its sales in the country.

With or without tax incentives, China’s auto market, will return to a
slower but more rational growth pattern sooner or later, as breakneck growth
was not sustainable, industry insiders say.

“The market loves explosive sales growth and we love it too, but it’s a
marathon not a 100-metre race,” Hu Maoyuan, chairman of top Chinese automaker
and GM’s main China partner SAIC Motor Corp told a shareholders
meeting late last.

Most analysts and auto executives are expecting industry-wide sales to
rise 10-15 percent.
($1=6.629 Yuan)
(Editing by Lincoln Feast)