Auto sector off to strong start in 2015 as SUV sales surge ahead

People walk past a row of Volkswagen e-Golf cars during the company's annual news conference in Berlin March 13, 2014. [Photo/Agencies]

China's auto sales accelerated in the first two months of this year, led by demand for sport utility vehicles and minivans.

Retail deliveries of passenger vehicles increased by 16 percent to 3.49 million units in January and February, the China Passenger Car Association said on its website on Tuesday. Sales of SUVs and minivans surged 66 percent and 20 percent, respectively.

The first two months of sales data are taken together to rule out the impact of the week-long national Lunar New Year holiday, which falls on different days each year.

The faster pace of growth marks a strong start to a year when sales are forecast by the State-backed China Association of Automobile Manufacturers to increase 8 percent to 21.3 million vehicles.

That compares with the target of about 7 percent economic growth announced by Premier Li Keqiang, the slowest annual expansion for China since 1990.

"According to current market demand, there isn't a high expectation for growth to exceed projections for the entire year," said John Luo, a Hong Kong-based analyst at Guosen (HK) Securities Co. "The economy plays a big role."

Wholesale deliveries of passenger vehicles in January and February climbed 8.7 percent to 3.43 million units, according to the China Association of Automobile Manufacturers. Vehicle sales rose 4.3 percent to 3.91 million units, the association said.

Concerns that more cities may be pressured to cap the registrations of new vehicles were fanned by a popular Chinese documentary film highlighting the air pollution choking many of the country's big cities.

Xinhua News Agency reported President Xi Jinping as saying that the government will "punish, with an iron hand, any violators who destroy ecology or environment, with no exceptions".

Cities such as Nanjing and Chengdu may announce curbs on auto sales this year, according to Harry Chen, a Shenzhen-based analyst at Guotai Junan Securities Co.

Among foreign automakers, General Motors Co posted a 0.8 percent drop in combined January and February sales, while Ford Motor Co's deliveries increased 15 percent in the same period.

Toyota Motor Corp and Nissan Motor Co reported gains of 14 percent and 12 percent, respectively, with Honda Motor Co the only major Japanese automaker to register a decline in deliveries, down 8 percent from a year earlier.

Japanese automakers may operate their vehicle assembly plants at a 77 percent utilization rate this year, the lowest of foreign producers in China and an indication of its sales prospects, according to projections by Bloomberg Intelligence.