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January sales point to solid demand but are atypical

Sales of automobiles in January 2013 exceeded a record 2 million units, up 46 percent compared with the same month in 2012, according to the latest data released by China Association of Automobile Manufacturers (CAAM).

Sales of passenger vehicles registered a high 49 percent growth to 1.7 million units and those of commercial vehicles were up 35 percent year-on-year to 309,000 units.

While January numbers show that market demand has picked up momentum after two years of sluggish growth driven by a recovering national economy since December, we must remember that the exceptional high growth in January is atypical and not indicative of actual market demand in 2013.

The record January sales were mainly due to seasonal reasons, especially the timing of China’s Spring Festival holidays.

The Lunar New Year’s Day fell in different months of the Western calendar in the last two years, January 23 in 2012 and February 10 in 2013.

As a result, January 2013 had a full additional work week compared to January 2012, leading to expanding output and sales. The beginning of a long Spring Festival break on January 23 (Monday), 2012 meant that manufacturers and dealers had effectively only a three-week month compared to the five-week month of the previous January. Moreover, taking into consideration of slowed work during the pre-Spring Festival week, January 2012 was more like a two-week work month. It is therefore not surprising to see close to 50 percent growth in both output and sales in January 2013 with twice as many effective work days because this year’s pre-Spring Festival week fell in February.

For the same reason, automobile sales in January 2012 declined by 27.5 percent, passenger vehicles declined by 24 percent and commercial vehicles 38 percent because the Lunar New Year’s Day in 2011 fell on February 3.

As China is poised to further urbanize in the next decade, demand for automobiles will continue to grow. But because of the high base number of around 20 million in annual sales plus increasing problems of energy safety, pollution and urban congestions, the country will unlikely be able to entertain double-digit annual growth rates down the road. The actual performance of the overall market in the first quarter will give us a better idea about the prospects of 2013.


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