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Sydney, Jan 10, 2006 (ABN Newswire) - The imminent oversupply of over 2 million cars a year in China can be corrected given a new policy favouring energy-saving cars and the proposed lift on a ban on small vehicles in downtown areas, said KGI Securities.
"The industry oversupply will be corrected," said KGI, adding economical cars will continue to enjoy increased sales in 2006 due to the policy change favouring vehicles with energy-conserving engines.
The National Development and Reform Commission (NDRC) and five other agencies recently announced a favoured development of small, environmentally-friendly cars with, energy-conserving engines. The NDRC also estimated the Chinese auto sector faced an oversupply of over 2 million cars per year.
The broker also predicted a tax reform on smaller cars following the government move on the auto sector.
The broker indicated it retained its Neutral stance on the industry while favouring FAW Xiali which has been upgraded to Neutral with its target price raised to RMB4.60 from RMB 3.65.
Changan Auto was also improved to Outperform and its target price pushed up to RMB4.84 from RMB4.20 while KGI Securities indicated remaining optimistic on Weifu-Tech.
