China March auto sales at record, govt policy helps

 Vehicle sales hit record in March

* Policy support continues to help push up volume

* Analysts, executives divided on outlook (Adds analyst, executive comments, analysis)

By Fang Yan and Michael Wei

Vehicle sales in China, the world's largest car market, climbed to a record in March, extending gains from the previous month, helped by government policy measures to bolster demand in both urban and rural areas.

A total of 1.10 million vehicles was sold last month, up from 1.06 million units in March 2008, which previously posted the highest monthly sales, data from the China Association of Automobile Manufacturers (CAAM) showed on Thursday.

"Few had expected such an explosive growth for the month. I certainly didn't as the economy had not shown clear signs of full recovery," said Yi Junfeng, an industry analyst with Changjiang Securities.

"It seems that the tax incentives for small cars and subsidies are really effective and the 10 percent annual growth target set by the government is achievable."

China's auto market has received a strong boost since February from government policy support measures, including tax incentives for small cars and subsidies.

The country's vehicle sales growth slowed in 2008 to its lowest annual rate in more than a decade as the global financial crisis took its toll.

Chery Automobile Co, maker of China's best-selling compact car QQ, sold more than 35,000 cars in March, hitting its second monthly record this year, it said on its website.

Ford Motor (F.N) also expects to grow faster than the overall China market this year, banking in part on policy support to lift sales of its new Fiesta small car rolled out last month.

China's overall passenger car sales also hit a monthly high of 772,400 units in March, up 10.26 percent from a year earlier, and a rise of 27.2 percent from February, official data showed.

To tap the potential of the country's vast rural areas, Beijing also promised to subsidise farmers who trade in high-emission light vehicles for clean and fuel-efficient ones.

That has helped push up sales of General Motors' (GM.N) light commercial vehicle venture in South China by 38.1 percent from a year earlier to 90,784 units in March, the Shanghai Securities News said on Thursday.

CAAM did not provide a breakdown of the country's March mini vans and mini truck sales -- mostly generated in inland and rural areas -- but said overall sales of cargo vehicles jumped 44 percent in the month from a year earlier.

SUSTAINABLE?

Industry executives and analysts, however, were divided over whether the boom in March could last into the rest of the year.

Klaus Maier, president and CEO for Mercedes-Benz operations in China, said on Wednesday he believed that the market had picked up again citing a steep 50 percent year-on-year jump in sales of the luxury saloon in the country last month.

Yao Jie, Vice Secretary-General of CAAM was also optimistic, betting on policy support to boost demand in rural area as well as second and third tier cities where per capita car ownership was still low.

But other analysts were wary of forecasting a sustained uptrend from one month's data, noting that March was traditionally a peak season for vehicle sales in the country.

"I not sure the explosive growth can be extended into the rest of the year as some of the incentives, such as subsidies, that got farmers into the showrooms may turn out to be a big disappointment," said Zhang Xin, an analyst with Guotai Junan Securities.

To get subsidies of up to 5,000 yuan ($732) for each vehicle they buy, farmers have to go through lengthy application procedures at various government bodies.

"Who knows whether they will get the money in the end. And if they don't, I doubt any of their neighbours would bother to go through the trouble," added Zhang. ($1=6.835 Yuan)

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