(From:CMB-CETA Editor)

Automobile sales in China last year raced past the U.S. market for the first time to take the top spot, as Chinese government incentives helped sales surge 46% from a year earlier to 13.6 million vehicles amid a broader global slowdown.

December auto sales in China nearly doubled, increasing 92% from a year earlier to 1.41 million vehicles, the China Association of Automobile Manufacturers said Monday.

Record sales in China last year coincided with the lowest sales total in the U.S. since 1982, as the credit crisis and the resulting slowdown in the economy prompted U.S. consumers to scale down purchases.

About 10.4 million light vehicles were sold in the U.S. last year, down 21% from 2008. The figure doesn't include sales of heavy commercial vehicles, which totaled about 500,000 units, according to CSM Worldwide analyst Yale Zhang. By contrast, China's 2009 sales, released by CAAM, include sales of heavy commercial vehicles.

Except for August, when U.S. auto sales were boosted by the cash-for-clunkers incentive program, China has sold more vehicles than the U.S. on a monthly basis since January last year, with global auto makers increasingly looking to China for sales growth.

Analysts expect the country's auto market to retain the top spot this year and exceed sales in the U.S. by at least two million vehicles. Nonetheless, analysts add that China's auto market probably won't be able to repeat 2009's strong sales.

Indeed, some analysts forecast overall auto sales to rise as little as 5% to 6%. Some auto makers were more optimistic and forecast growth in a range of 10% to 15%, however.

A big factor that could precipitate a slowdown is a scaling back of government stimulus. China's central government last January halved the sales tax on smaller-engine vehicles, which saw sales surge in 2009 as a result. But for 2010, Beijing has reduced its tax cut on small cars. This year, buyers will pay 7.5% instead of the 5% rate of 2009—though still less than the normal rate of 10%. Thus, the effect of stimulus policies could subside this year, even as China's overall economic growth has gained momentum.

Moreover, experts say many customers likely to be persuaded to buy a car by such stimulus measures already took the plunge last year and that those incentives "pulled ahead" sales from this year and even beyond.

Slower growth is likely to heighten competition among auto makers. As sales growth slows, analysts including CSM's Mr. Zhang say consumers could afford to become pickier, making it tougher for companies with less-attractive products to win customers.

Passenger-vehicle sales in China rose 54% last year to 10.3 million units, while sales of commercial vehicles rose 28% to 3.3 million units, CAAM said.

The U.S. sales figures for 2009 don't necessarily represent real demand for automobiles. Prior to the financial crisis, sales of light vehicles in the U.S. totaled 16.2 million vehicles in 2007, down 2.5% from 16.6 million in 2006.

In China, vehicle sales in 2008 totaled 9.4 million vehicles, up 6.7% from a year earlier.