Boston, MA -- (SBWIRE) -- 07/12/2012 -- Total new vehicle sales in China fell 3.4% year-on-year (y-o-y) in Q112, but marginal growth of 1% in March has kept sales volumes on course to meet BMI's forecast of 19.8mn units in 2012. This represents growth of 7% y-o-y, which is below the 8-10% forecast by the China Association of Automobile Manufacturers, but is still a solid improvement on the 2.6% growth of 2011, taking into account weaker economic growth and localised restrictions on car purchases.
Despite measures to curb congestion and emissions, such as caps on car purchases in some major cities, we believe there are still growth areas in the market. One of these is the premium car segment, which is supported by the results of individual carmakers. Daimler reported Q1 growth of 24% for its Mercedes- Benz brand in China, while rival Audi's sales were up 40% y-o-y. We see the trend for building Chinaspecific models and investing in local production to increase competitiveness as key growth drivers in the segment.
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The biggest risk to our forecasts throughout the year is still a potential hard landing. The economy grew at 8.1% y-o-y in Q112, below the consensus estimate of 8.4%, and the government has revised down its fullyear target to 7.5%. However, this is in line with the existing forecast of BMI's Asia team, which is already incorporated into our industry forecasts.
Carmakers remain undeterred, however. US carmaker Ford Motor has announced plans for a fifth passenger car plant in China, where the company aims to double its production capacity and dealership network by 2015. Although Ford is playing catch-up in China with close rivals such as General Motors Company (GM) and Volkswagen (VW), at a time when Chinese vehicle sales have slowed from the rapid growth of 2009 and 2010, the carmaker believes its investment is still worthwhile, owing to the longer-term potential of the market, which BMI expects to increase by 65% between 2012 and 2016.
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