Car sales growth in China will remain stagnant next year in the absence of incentives for buyers and China's tight credit control, raising pressure on car makers to cut prices and improve after-sales services, industry executives and analysts said on Monday.

China, the world's largest automobile market, is likely to see car demand grow between 3 and 10 percent in 2012, compared with about 5-6 percent expected for this year and down from 33 percent in 2010, industry executives said at an auto show in Guangzhou.

While automakers remain confident about the long-term outlook for China, as evidenced by a slew of expansion projects some have announced in recent years, near-term prospects are not promising amid global economic uncertainties.

China's auto market is very tough this year. You can see that from the January to October data, said Zeng Qinghong, president of Guangzhou Automobile Group Co Ltd <2238.HK>, a Chinese partner of Toyota Motor Corp <7203.T>, Honda Motor Co Ltd <7267.T> and Nissan Motor Co Ltd <7201.T>.

Car sales in China climbed just 1.4 percent in October, causing growth for the first 10 months to ease to 5.9 percent as the government removed subsidies on small cars and raised the eligibility for fuel-saving incentives.

China's car sales should grow about 6 percent this year and should be roughly the same in 2012, said Zeng.

Sales are affected by government policies, including banks tightening lending. We can feel that. Dealer credit and car financing are also tightening, Zeng added.

Zhang Baolin, president of Chongqing Changan Automobile Co <000625.SZ>, was more pessimistic, forecasting sales to grow as little as 3 percent in 2012 from 18.5 million units estimated for this year.


Slowing sales growth, coupled with capacity expansion may push some automakers to cut prices or spend more on after-sale services to drive growth, with competition focused on models priced at 200,000 yuan ($31,500) or more, analysts said.

Some car dealers told Reuters that although they had not announced price cuts, they had started providing cash rebates for buyers.

Fang Qinliang, sales manager at Guangzhou Mingzhi Auto Trading co Ltd, said his company, which sells Emgrand brand sedan cars made by Zhejiang Geely Holdings Group Co Ltd, would provide a cash rebate of 2,000-3,000 yuan for each car sold.

Some of his industry colleagues would provide cash rebates of up to 20,000 yuan on other models, he said.

Price competition, which has already been seen earlier this year, will still be there as a way to clear inventories, said Linus Yip, chief strategist at First Shanghai Securities.

But it will not be a main theme as the car makers have been putting more effort into providing quality draw potential buyers, he said, adding that the current share prices of some Hong Kong-listed Chinese automakers reflected slowing car sales growth.


High-end cars were doing much better in terms of sales growth, partially because the market had only recently begun to take off, executives and analysts said.

Volvo, owned by China's Geely Automobile Holdings Ltd <0175.HK>, should see 40-50 percent sales growth in China next year, said Richard Snijders, president and chief executive of Volvo's China distribution unit.

Volvo expected to sell 48,000-50,000 cars in China this year, said Snijders, up from just over 30,000 units last year.

The premier market is not affected as much. We are still a small player in China. We can still grow fast because we can be a bit more nimble and a bit better than what we have been doing, he added.

A China joint venture of French car maker PSA Peugeot Citroen

and China Changan Automobile Group said on Sunday that it planned to tap the premium car market in China.

German premium carmaker BMW AG's third-quarter earnings surpassed expectations, bolstered by robust growth in China and demand for its 5-Series sedan.

(Additional reporting by Donny Kwok; Writing by Charlie Zhu; Editing by Chris Lewis and Matt Driskill)