After dipping more than 7 percent year-on-year in the fourth quarter of 2008, auto sales in China have undergone a remarkable rebound in the year to date.

Will this brighten the future of automakers in China?

For some, certainly. But not for everybody.

Passenger vehicle sales topped 831,000 units in April, according to the China Association of Automobile Manufacturers (CAAM). That was up from March's 546,000 units and a new record high.

The figure brings total sales of passenger vehicles for the first four months to 2.8 million units, up 15.1 percent from a year earlier.

Yet this growth has come mainly from small cars; a direct result of January's halving of purchase tax on vehicles with engine displacements of 1.6 liters or smaller.

So while the sub-compact car segment posted a 15 percent sales growth in the first quarter, sales of mid-sized cars dropped 12 percent from a year earlier, according to Automotive Resources Asia (ARA), a unit of J.D. Power & Associates.

Luxury cars are also left out of a seemingly bullish market. In the first quarter, BMW's sales inched up 3 percent year-on-year while Lexus's sales remained unchanged.

Exuberance in small car sales has also failed to reverse falling profits in the industry as a whole.

According to the CAAM, the total profits of all of China's 19 major auto manufacturing enterprise groups (including their joint ventures with international companies) tumbled 48.4 percent in the first quarter from a year earlier.

What can automakers in China can expect from the domestic market for the rest of this year?

Well, first of all, sales will be unlikely to remain at record levels since the influence of the purchase tax cut on small cars cannot be expected to last long.

Additionally, summer is traditionally the slackest season for auto sales in China.

Nonetheless, thanks to favorable economic and market conditions, passenger vehicle sales are still on course to achieve a pretty impressive growth.

Encouraged by the relatively good shape of the national economy, Chinese consumers now feel more confident about spending money.

Their extra spending has not only been on cars. Retail sales in China increased 15.9 percent in the first quarter, according to official statistics.

And there is still huge latent demand for cars. China's ownership rate is below 50 units for every 1,000 people, much lower than the international average.

But above all, we have a government willing to shore up the domestic auto market.

Miao Wei - formerly president of Dongfeng Motor Corp. and now deputy chief of China's Ministry of Industry and Information Technology - said in April that if needed, his ministry would further reduce the vehicle purchase tax to protect the recovery of the domestic auto industry.

The rebound will not ending any time soon.

Source : internet

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