China Car Sales Bounced Back in June

Chinese passenger-car sales bounced back in June, raising hopes that the world's biggest auto market is gaining momentum after a tepid start to the year.

Passenger-car sales-- which had declined in April and May, the biggest dip in two years--were up 2.3% in June from a year earlier, the China Association of Automobile Manufacturers said on Tuesday. The 1.83 million vehicles sold pushed the first-half total to 11.25 million, up 1.6% from a year earlier.

After last year's exceptional 16% growth in passenger-car sales, China's auto industry had expected a slowdown in 2017. Growth is still on track for 5% this year, assuming sales accelerate as expected in the second half, said Xu Haidong, the association's assistant secretary-general.

Total Chinese vehicle sales in the first half were up 3.8% to 13.35 million, buoyed by strong demand for commercial vehicles.

Among foreign makers, Japanese companies had the biggest first-half games: Honda Motor Co. increased its China sales by 18.7%, Nissan Motor Co. by 6.7% and Toyota Motor Corp. by 5.4%.

Some nimble product launches struck a chord with Chinese buyers, said Yale Zhang, managing director of Automotive Foresight. For example, in March Honda launched the UR-V, a large sport-utility vehicle that taps into rising demand for SUVs.

Other foreign auto makers struggled in the first half. General Motors Co. had a 2.5% drop in sales and Ford Motor Co. slumped 7%

Political tensions between Beijing and Seoul over South Korea's missile-defense program contributed to a nightmare first half for Hyundai Motor Co., whose sales plunged 47%.

Both GM and Ford drew encouragement from strong June sales as they look to China to compensate for weak U.S. demand. GM posted a 4.3% sales bump last month, while Ford soared 15%.

"The momentum we've found in Q2 and June, we're optimistic about that rolling forward through the rest of the year," Ford's Asia-Pacific president Peter Fleet said in an interview, adding that the company expects high single-digit growth in China in the third quarter.

GM plans to introduce 10 new models in China before the end of 2017, China head Matt Tsien said in a statement.

Both U.S. makers benefited from their luxury brands: sales of GM's Cadillac increased 75% in the first six months of the year, while Ford's Lincoln doubled its sales.

Auto sales in China surged in late 2016 as consumers bought ahead of an increase in the sales tax on small-engine vehicles to 7.5% from 5%.

A planned increase to 10% at the end of the year--which would complete the unwinding of a tax cut made in 2015 to buoy a slumping market--could produce a similar late-year spike in sales, said Mr. Fleet, though he noted that some auto analysts think the government may put the plan on hold to help keep the market stable.

It is unclear whether Beijing will go ahead with the tax increase, said Chen Shihua, assistant secretary-general at the automobile association, calling for greater policy continuity to assist the auto industry.

Among Chinese makers posting strong first-half sales was SAIC Motor Corp., the country's biggest car company. Its group sales were up 5.8% to just over 3 million vehicles, including joint-venture production with GM and Volkswagen. Sales of SAIC's own-brand passenger cars more than doubled, albeit from a relatively low base.

Geely Automobile Holdings' sales nearly doubled in the first half, putting it on track to sell over 1 million vehicles in a year for the first time.

Guangzhou Automobile Group Co.'s sales, including of joint-venture vehicles, were up 32% in the first half, with sales of own-brand cars up 57%.

Lilian Lin in Beijing contributed to this article.

(END) Dow Jones Newswires

July 11, 2017 08:13 ET (12:13 GMT)