Vehicle sales in China rose by 25.7% year-on-year (y/y) in October to 576,300 units, according to the Chinese Association of Automobile Manufacturers (CAAM).

Passenger car sales increased 28.2% last month to 410,000 units, while commercial vehicle sales rose by 26.1% to 166,300 units.

Year-to-date, overall vehicle sales increased 25.7% to 5.77m units, while overall vehicle output by China's manufacturers rose by 27.6% to 5.89m units.

According to analysts Global Insight Shanghai Automotive led Chinese automakers as a result of the company's joint ventures (JVs) with General Motors (GM) and Volkswagen (VW).

In the first 10 months of 2006, the SAIC group sold 994,500 units. This marked increase of 40.0% for the year was the result of particularly strong sales from China's leading automotive JV Shanghai GM, Global Insight said, noting that the JV between China's largest car maker and the world's number one car maker is set to receive a further boost this month as four new Cadillac models are launched in China and increase the company's presence in the growth premium segment of the market.

First Automobile Works (FAW) was second with 946,700 units, a 23.6% rise year on year. Sales by Dongfeng Motor, Beijing Automotive and Changhan Automotive were 742,200, 555,500 and 553,000 units, respectively.

Shanghai-GM's Buick Excelle (a rebadged Daewoo model) was again China's best-selling passenger car in October, as it has been in recent months, although the FAW-VW Jetta remains the best-selling model YTD.
Shanghai GM was the best-selling manufacturer in October with 27,500 units, followed by FAW Volkswagen (26,200), Shanghai Volkswagen (25,600), Beijing Hyundai (21,100 units) and Guangzhou Honda (19,000).

"The powerhouse that is the Chinese economy continues to underpin growth in the country's automotive market. High levels of state investment in improved infrastructure, and increasing investment from foreign corporations continue to be the catalyst for rising living standards and the increased levels of disposable income required to drive vehicle sales," Global Insight said in a research note.

"This state of affairs is set to continue in the foreseeable future, with GDP growth set to once hit double figures in 2006. As things stand at the end of October, Global Insight's Chinese vehicle industry sales forecast of 7.16m units for the 2006 calendar year would appear accurate. This would represent impressive growth of 25% on 2005's sales figure of 5.73m units."

The analysts cautioned that increasing competition among the car makers means continued downward pressure on prices will continue to affect profitability. In addition, continuing rises in the country's vehicle parc are likely to have knock-on effects in terms of fuel prices, as supply struggles to keep place with demand. This factor is likely to influence a gradual switch to small, more fuel-efficient vehicles over the next few years.