HONG KONG -- The Chinese car making joint venture between Honda Motor Co. and Denway Motors Ltd. said its July unit sales jumped 81 percent year-on-year but dipped from June, in the latest sign that growth is stalling in the country's once-roaring auto sector.
Industry-wide sales slowed in June for the third month in a row, growing slightly on the year, as Beijing clamps down on credit to curb rampant economic growth. Surging capacity, meanwhile, has forced automakers to cut prices.
State media are speculating that for the first time, July car sales in China fell on a year-on-year basis.
Denway is regarded as less vulnerable to the industry slowdown than some of its peers because of the popularity of Honda cars in China.
Guangzhou Honda Automotive Co., which is 47.5 percent held by Hong Kong-listed Denway, said on its Web site on Wednesday that it sold 20,869 cars and minivans in July, about 1.9 percent fewer than the 21,275 it sold in June.
The July figures bring the company's total this year to 101,008 vehicles, a 68 percent increase from a year earlier thanks to capacity expansion and continued demand for its popular Honda Accord and Fit sedans and Odyssey minivans.
A Guangzhou Honda spokesman said the company is still producing in line with its full-year sales target.
"We continue to have zero inventory," he told Reuters.
Denway's stock has fallen 28 percent so far this year, but has outperformed a 60 percent decline in Hong Kong-listed rival Brilliance China Automotive Holdings Ltd.
Brilliance has a luxury car-making venture with BMW AG and is also the mainland's biggest maker of minibuses.
Shanghai-based UBS analyst Henry Wu said the Guangzhou Honda decline from June was probably due to seasonal factors, noting that sales in August 2003 were relatively weak before picking up towards the end of the year.
Denway is the only Chinese automaker Wu rates as a "buy".
In June, the joint venture boosted its full-year sales target by 5.8 percent to 211,500 units from an earlier goal of 200,000. That means it will need to sell an average of 22,098 cars a month for the remainder of the year.
Deputy Managing Director Zeng Qinghong told a mainland newspaper that the company will "for sure" not cut prices this year. He acknowledged that market conditions are difficult, with higher raw material costs.
He said the company is adjusting its output to meet demand for Accords with smaller 2.0 and 2.4 liter engines, as well as its Fit economy model.
Earlier this week, Volkswagen AG's two main Chinese joint ventures reported sales of 50,215 cars during July, a 52.8 percent rise from June after price cuts stimulated demand.
Ford Motor Co.'s main Chinese partner, Changan Auto, on Tuesday posted a 7.3 percent fall in second-quarter earnings as revenues skidded due to a vicious price war.
Foreign carmakers including Volkswagen and Ford plan to spend a combined $13 billion tripling production capacity in China to 6 million cars a year by the end of the decade, which means more competition and perhaps further price cuts.
China car sales are expected to increase by just 20 percent this year after nearly doubling to two million units in 2003.