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China's Feb auto sales slow, hit by holiday

FILE - In this Jan. 8, 2010 file photo, a man talks on his mobile phone as he walks past the cars displayed for sale at an auto market in Beijing. The China Association of Automobile Manufacturers reported Wednesday March 9, 2011, that sales of all vehicles fell 33 percent from the month before in February, to 1.27 million units, the official Xinhua News Agency reported. (AP Photo/Andy Wong, File)
FILE - In this Jan. 8, 2010 file photo, a man talks on his mobile phone as he walks past the cars displayed for sale at an auto market in Beijing. The China Association of Automobile Manufacturers reported Wednesday March 9, 2011, that sales of all vehicles fell 33 percent from the month before in February, to 1.27 million units, the official Xinhua News Agency reported. (AP Photo/Andy Wong, File) (Andy Wong - AP)

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By ELAINE KURTENBACH
The Associated Press
Wednesday, March 9, 2011; 7:03 AM

SHANGHAI -- China's voracious demand for cars eased in February, as surging gasoline prices, the end of government subsidies and a major holiday took a toll on the world's biggest auto market.

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The China Association of Automobile Manufacturers reported Wednesday that total sales including buses and trucks fell 33 percent in February from the month before to 1.27 million vehicles. Sales of passenger cars dropped 37 percent to 967,200 vehicles.

The 5 percent increase from a year earlier for all vehicles and 2.6 percent rise for passenger car sales represented the slowest pace of growth in more than two years.

The quasi-official automobile industry group attributed the deceleration in sales to the weeklong Lunar New Year holiday. Auto sales in China often hit a lull before picking up later in the spring.

But the market has been showing signs of cooling after the government ended subsidies for purchases of small cars and Beijing, the capital, enacted quotas for car purchases in the city.

China's vehicle sales in January-February rose about 10 percent year-on-year to 3.15 million, while output climbed 9.6 percent to 3.1 million vehicles, the report said. But that compared with an 84 percent jump in sales in the same period of last year.

Figures from the Shanghai-based China Passenger Car Association showed similar trends for sales in February.

"The impact from the policy changes was big. We estimate that sales may be reduced by at least 3 million in 2011 due to those changes," said Rao Da, secretary-general of the independent research association.

Fluctuations in demand over the past few years have sparked a debate over whether automakers - local and foreign - are overinvesting in capacity to meet overblown expectations for future demand.

But many analysts believe the market needed to settle into a more sustainable pace of expansion after years of torrid growth, and that demand will continue to expand at a relatively rapid rate.

"Auto purchasing power was overdrawn in the past two years and now it needs to accumulate again," Rao said. "The incentive policies should have been withdrawn a long time ago."

While demand for small cars and vans has cooled, sales of higher-end vehicles have remained strong as current car owners upgrade to sport-utility vehicles and imports. While sales of SUVs fell nearly 30 percent in February compared with January, they were still up nearly 50 percent from the year before.


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© 2011 The Associated Press

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