Business

Foreign carmakers are rushing to raise vehicle output or open new plants in China as brisk sales and a stronger-than-expected economic recovery in the first half have raised expectations about the world’s biggest auto market.

“The rebound in car sales, which has accelerated in the past few months, is prompting car makers in China to ramp up production again as they have also put in place long-term expansion plans,” said Frank Gong, JP Morgan managing director and China economist.

In the first six months, China sold 4.5 million passenger cars, a 25.6-percent increase from a year ago, as the government’s tax reduction and incentive subsidy for rural residents spurred small car sales.

The better-than-expected sales surge buoyed carmakers’ confidence, after they had curbed production initially due to the sharp economic slowdown late last year.

Vehicle manufacturers also see a bright future in China as the government reported yesterday that the gross domestic product grew 7.1 percent from last year to 13.99 trillion yuan in the first half.

Kevin Wale, president and managing director of GM China, raised his forecast for China’s total auto sales growth rate this year from between 5 and 10 percent he made in April to about 15 percent, after his company posted a 38 percent year-on-year growth in the first half.

GM had earlier said it planned to double its output in China to 2 million units annually over five years.

GM’s German rival Volkswagen AG also confirmed to China Daily that its joint ventures in China would expand production capacity in the second half to meet increasing demand, without divulging details.

“We will optimize the capacity of our plants in Nanjing and Chengdu for the sake of supporting our businesses in new markets,” said the company in an email statement.