China's sales outlook cut by trade group on slow economy, truck slump

BEIJING (Bloomberg) -- China's state-backed auto association forecast that vehicle sales will slow more than it previously projected, as the economy shows little signs of improvement and more cities consider purchase restrictions.

Total industry vehicle deliveries will probably rise 8 percent to 23.83 million units, compared with its January prediction for 10 percent growth, the China Association of Automobile Manufacturers said in a statement today.

Last year, sales increased 14 percent, making China the first country in which more than 20 million vehicles were sold in any given year.

Demand for commercial vehicles slumped in the first half of this year as analysts forecast the world's second-largest economy to expand at the slowest annual pace since 1990.

More local governments are considering limiting the number of new vehicles to cut emissions in support of Premier Li Keqiang's "war" on pollution.

"We believe the economy hasn't shown obvious signs of improvement in the second half," Xu Haidong, director of the auto association's trade coordination department, said in a telephone interview. "It's hard to say whether more local governments will issue restrictions this year but this is definitely one of the risks we have to take into account."

Passenger-vehicle sales climbed 11 percent to 9.6 million units in the first six months of this year, led by demand for multipurpose and SUVs, according to data from the association.

Demand for commercial vehicles slid 3 percent to 2.04 million vehicles in the same period. China's gross domestic product expanded 7.4 percent in the first quarter from a year earlier, the slowest pace since 2012 and down from 7.7 percent in the previous three months.

GDP is forecast by analysts to grow 7.4 percent this year.

"Commercial vehicles are more closely related to the economic situation," said Yale Zhang, Shanghai-based managing director of researcher Autoforesight Shanghai Co. "Usually, if there are not a lot of investments, the truck demand will be affected. If there's no construction projects, truck demand will be lower."

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