2nd UPDATE: GM, Ford China Sales Exceed Industry Forecast

China vehicle sales growth at General Motors Co. (GM), Ford Motor Co. (F) and their China-based joint ventures dropped significantly in 2011 amid a slowing economy and a less favorable domestic policy environment.

However, both companies exceeded an industry group's forecast for total vehicle sales growth in China, suggesting resilient demand for some foreign brands in an increasingly competitive market.

Ford said in a statement Monday its vehicle sales in China rose 7% to 519,390 units last year, following growth of 40% in 2010. Sales rose 10% in December to 49,238 vehicles, the company said.

Also Monday, GM said its sales in China rose 8.3% to 2.55 million in 2011. GM and its joint ventures sold 196,797 vehicles in December, up 9.8% from a year earlier, the company said in a statement. GM sales rose 28.8% in 2010.

Sales at both companies grew more quickly than an industry-wide forecast for 2%-3% sales growth in China's car market, made in October by the China Association of Automobile Manufacturers. A weak market prompted the association to cut its annual forecast twice last year from an initial growth estimate of 10%-15%. Auto sales grew 32.4% in 2010, supported by government purchase incentives.

While GM and Ford reported strong sales growth in different market segments--GM saw robust demand for its Buick and Cadillac brands, while Ford had a strong performance at its Jiangling Motors Corp. commercial-vehicle venture--the companies' numbers illustrate the advantage enjoyed by foreign firms in China's auto market.

Yale Zhang, an analyst with consulting firm Automotive Foresight (Shanghai) Co., said the phasing out of government incentives at the end of 2010 was one of a number of factors weighing on the industry, with a relatively larger impact on domestic makers.

"The consumer group of local products is very price-sensitive...In 2011, (inflation) was high, gasoline prices were very high, and these two factors frustrated these consumers," Zhang said.

Buyers of foreign car brands--which tend to be more expensive than their domestic counterparts--are less susceptible to such price pressures, Zhang said.

The industry association has said it expects sales to quicken this year as Beijing eases its economic policies. A spokeswoman for the association said it would release December car sales data later this week.

Japan's Toyota Motor Co. (TM) said last week it planned to increase sales in China by at least 10% in 2012, with a goal of reaching 1 million unit sales. Toyota and its joint ventures sold 883,000 vehicles in China in 2011, an increase of 4%.

-By Andrew Galbraith, Dow Jones Newswires; 8621 6120-1200; andrew.galbraith@dowjones.com

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