China Auto Sales Retreat in May for the Second Straight Month

Vehicle sales in China fell in May for the second straight month, reported Thursday the China Automobile Manufacturers (CAAM), prompting the government to take measures to support the market.

Vehicle sales across all categories on the world’s first car market fell 3.98% to 1.38 million units compared with May 2010, the CAAM said in a statement.

For passenger cars alone, the market decline was only 0.11% to 1.04 million units.

In April, sales had decreased by 0.25%, which represented the first decline since January 2009 when the market had declined by 14.35% because of the impact of the global financial crisis.

The first five months of the year, sales rose 4.06% to 7.9 million units across all categories (cars, buses, trucks and light commercial vehicles) and from 6.14% to 6.03 million only for passenger cars.

The current trend of declining automobile market, a key sector of the Chinese economy, could portend a slowdown in the second world economy. The growth of the automobile market had already slowed in the middle of last year, when the government began to put an end to incentives introduced to boost the market.

Earlier this year, tax on the purchase of small cars was increased, and the city of Beijing had severely restricted the registration of new vehicles.

But a subsidy of 3,000 yuan for the purchase of any vehicle less than 1.6 liter engine has been maintained and should remain in place in the near future, said the secretary general of CAAM, Dong Yang, during a press conference.

For their part, the Ministry of Commerce has announced grants of between 11,000 and 18,000 yuan for the scrapping of old trucks, buses and agricultural machinery.

According to most analysts, who forecast a market increase between 10% to 15% in 2011, the decline of the market should be temporary.