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GM, Daimler, VW Forecast China Market Gains

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GM, Daimler, VW Forecast China Market Gains

By NORIHIKO SHIROUZU

SHANGHAI—China's domestic auto market could reach sales of more than 17 million vehicles this year and 19 million next year, said a senior General Motors Co. executive, outpacing home-market sales for several Western auto brands.

Daimler AG Chief Executive Dieter Zetsche on Friday separately said he expects Chinese consumers to become the biggest buyers of Mercedes Benz cars in the next three to five years. Volkswagen AG's Audi unit expects its sales in China to surpass German sales next year.

With China's booming economy raising personal income, the country's auto market will likely continue to offer a "tremendous upside potential," said Kevin Wale, GM's head of operations in China. He predicted China is likely to hold on to its newly acquired status as the world's largest auto market for the foreseeable future.

The sales forecasts that Mr. Wale offered Thursday in Shanghai are up sharply from the 13.7 million vehicles that auto makers sold in China last year as the country's auto market grew nearly 50% to surpass the U.S. as the world's biggest.

Daimler aims to sell 300,000 vehicles in China in 2015, Mr. Zetsche said at a briefing in Beijing, adding the company plans to produce 70% of its vehicles sold in China locally by 2015. Daimler's China sales for the nine months ended Sept. 30 totaled more than 101,350 units, up 129% from a year earlier.

China has already become a key outlet for GM, Audi and others and a hotbed of manufacturing for the auto makers. Mr. Zetsche said Daimler is on track to start producing in 2013 at a Beijing factory the engines for cars it expects to sell in China.

Mr. Zetsche also said he doesn't expect any major overcapacity in China's auto industry if its economic growth remains at a fast pace.

On Friday, Volkswagen posted a 20% revenue increase for the nine months ended Sept. 30 and forecast significantly higher unit sales for 2010 "due among other factors to the positive business growth in China."

VW's profit after tax rose to €4.03 billion ($5.61 billion) from €655 million a year ago. Revenue for the nine-month period was 92.55 billion, from €77.16 billion the same period a year ago.

Favorable exchange rates boosted VW's earnings. It said that should continue to be the case for the rest of this year. With the relative weakness of the euro against the dollar, earnings generated in the U.S. and China are inflated when converted. The Chinese Renminbi is tied to the dollar.

VW said profit also was aided by equity-accounted investments, including joint ventures in China and options related to its takeover of German sports car maker Porsche.

Some analysts and industry insiders had predicted at the start of this year that car-sales gains in China would slow significantly in 2010, especially toward the end of the year, from the torrid pace achieved in 2009.

But thanks to fresh government sales incentives for small cars, among other reasons, the auto sales that slowed during the second quarter have been stabilizing more recently.

GM's sales forecast for Chinese consumers to buy 19 million vehicles in 2011 is "reasonable," said Yale Zhang, an independent auto analyst in Shanghai. Still, the company's forecast means growth in the Chinese auto industry is going to continue to slow, albeit gradually.

"Next year will be a difficult year compared with the last few years," Mr. Zhang said, as some of the stimulus policies that have boosted auto sales expire at the end of this year. He also pointed to talk about a possible increase in China's vehicle ownership taxes that might take effect next year.

Mr. Wale said in the long term, aside from favorable government policy support such as vehicle purchase incentives, China's continued economic strength, along with the resulting rise in personal income, are likely to keep automobile sales growing.

The GM executive said more Chinese consumers are becoming wealthy enough to buy cars, clearing the threshold for car ownership, which he described as individuals making between $3,000 and $4,000 a year. As a result, auto sales are booming now not just in big cities such as Beijing, Shanghai and Guangzhou but also more rapidly in smaller, lesser-known cities in the country's inland west.

—Owen Fletcher and Jan Hromadko contributed to this article.

link:

http://online.wsj.com/article/SB10001424052702303871104575567193323098232.html?mod=googlenews_wsj

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