China July car sales growth slowest in two years

Fri Aug 8, 2008 4:25am EDT

SHANGHAI, Aug 8 (Reuters) - Car sales in China, the world's second-largest vehicle market, rose at their slowest annual pace in two years in July as a fuel price hike and easing economic growth spurred consumers to delay purchases.

Car sales rose 6.79 percent from a year earlier to 488,200 units in July, the slowest monthly gain since July 2006, when sales climbed 5.82 percent to 396,400 cars, according to data from the China Association of Automobile Manufacturers.

New government tax measures and higher fuel prices were blamed for the unusual slowdown to single-digit growth in July 2006.

From January to July of this year, car sales, including multipurpose vehicles and sport utility vehicles, rose 15.79 percent from a year earlier to 4.10 million units, the association said late on Thursday.

China's car sales have grown by 20 percent or more per year for the last three years, but the pace slowed to 17.07 percent in the first half of this year due to a decelerating economy, a weak stock market and a devastating earthquake that hit southwest China in May.

The car market was hit by additional bad news in late June, when Beijing raised fuel prices by nearly 20 percent, the first rise in seven months and the steepest one-off hike ever.

A recent on-line survey by Chinese Internet portal Sina.com and market researcher J.D. Power found that the price hike could delay vehicle purchases and bolster sales of fuel-efficient cars.

Analysts said they expected car sales to grow about 15 to 18 percent for the full year, falling short of the break-neck pace since 2005.

They added that growth may ease further in 2009 or 2010, particularly if China's economy slows and if oil prices continue surging. (Reporting by Fang Yan; Editing by Edmund Klamann)