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China's car market remains pivotal for auto giants

China's Car Market Remains Pivotal For Auto Giants

China’s Car Market Remains Pivotal For Auto Giants

Yes, China’s burgeoning automobile market will eventually calm down from what can only be described as parabolic growth.

Moody’s Investors Service even predicted negative growth in Chinese auto demand for the fourth quarter of this year, but going forward this is still a market global auto giants have to have a foothold in.

Believe it or not, General Motors is doing pretty well in China. The bankrupt auto giant said its sales in China rose to a record 196,004 units in May. Sales at its Shanghai GM venture soared almost 49% to 83,302 units.

Sales at the SAIC-GM-Wulling venture jumped 5.2% to 105,395 units in May, according to Bloomberg News. GM sold 1.03 million units in China through the first five months of this year, an increase of almost 54% from a year earlier.

Separately, China’s government said it will subsidize the purchase of energy efficient cars to reduce emissions. China is the world’s biggest polluter and the government subsidies could increase sales of green cars by $59 billion, or the equivalent of 4 million units by 2012, according to Bloomberg.

Buyers of hybrid cars powered by traditional gas or diesel fuel in China would receive a subsidy of about $440. Buyers of plug-in cars would get a $7,300 subsidy while buyers of battery-powered cars would land a subsidy of almost $8,800.

This could be good news for the likes of GM and Toyota (NYSE: TM), which have been boosting production of environmentally friendly cars in China. Buyers have previously had to deal with lofty price tags, keeping sales of green cars muted in China.

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