Running on fumes

9 December 2009 By Wei Gu

China’s passenger cars sales almost doubled in November, thanks to major government incentives but these will be hard to replicate next year. Investors in automakers such as Geely, whose shares have increased more than sevenfold in a year, may have got ahead of themselves.

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China's passenger car sales jumped 98 percent in November from a year earlier, leaving the world's largest car market on course for 50 percent growth in 2009, driven by a government tax cut for small cars and rebates for purchases by villagers.

China reaffirmed its progrowth policy for 2010 in an economic planning meeting, stressing the need to promote consumption, but it stopped short of confirming that current incentives for the auto industry will continue in 2010.

Shares in Geely Auto, the Chinese carmaker that manufactures London taxicabs, have risen 766 percent in the past year, while shares in BYD, the batteries and car maker partowned by U.S. investor Warren Buffett, are up 524 percent during the same period.

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