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According to the China Association of Automobile Manufacturers (CAAM), vehicle sales in China went up 19.5% to 2.84 million units in Jan–Feb from 2.37 million units a year ago. The increase in sales was much higher than last year. In 2012, sales grew 4.3% to 19.3 million vehicles.

However, sales fell 13.6% in Feb due to the Lunar New Year holidays. However, strong sales by Ford Motor Co. (F - Analyst Report) and Hyundai Motor Co. lifted sales in the world’s biggest market during the period. Sales of vehicles, including buses and trucks, escalated 15% to 3.39 million units in the first two months of the year, according to the CAAM.

Ford reported a 46% rise in sales to 105,209 vehicles while Hyundai reported more than 40% increase in sales to 177,000 vehicles in the period. General Motors Company (GM - Analyst Report) and its Chinese joint venture partners sold 525,835 vehicles in the period, up 7.9% from Jan–Feb 2012.

Sales of Japanese brands, including Toyota Motor Corp. (TM - Analyst Report), Nissan Motor Co. (NSANY) and Honda Motor Co. (HMC - Analyst Report), hampered due to the political conflict between Beijing and Tokyo over disputed islands in the East China Sea. According to the CAAM, sales of Japanese passenger cars dipped 17.1% year-over-year in Jan-Feb this year.

Sales of Volkswagen AG’s (VLKAY) Audi, improved 16% in the period. Audi is the top-selling luxury brand in China. However, Daimler AG’s (DDAIF) Mercedes-Benz posted a 39% decline in sales to 26,829 vehicles during the period under study.

According to the CAAM, auto sales in China are expected to rise 7% to more than 20 million vehicles in 2013, led by strong demand for passenger vehicles and economic recovery. The association believes SUVs will remain the fastest- growing segment in the year while commercial vehicles will record a moderate gain in sales.

However, the Chinese government is concerned about rising air pollution in the country due to the ever increasing vehicles on the road. As a result, China’s State Council announced a stricter standard for auto fuel recently, which will be promoted nationwide by 2017. These steps may damage the health of the auto industry in China.

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