China Jan car sales up 16 pct on inventory restocking

Automakers in China shipped 16.2 percent more cars to dealers in January as they moved aggressively to replenish inventories that were nearly depleted after explosive sales in December.

However, the world's largest auto market will lose some of momentum in the coming months since the government stripped away most of its incentives at the start of the year, industry observers said.

"Dealerships all across the country were crowded in December as people sought to take advantage of government incentives before the expiration. Many were actually paying the money upfront and waiting for months to get their cars," said Boni Sa, an analyst with IHS Automotive.

"The Chinese Lunar New Year also bolstered demand for big-ticket items, but the following months could be challenging for automakers."

Many Chinese typically go on a buying spree ahead of the week-long Spring Festival holidays -- which ran from Feb 2 to Feb 8 in 2011.

But the holiday binge for autos actually started in December as many rushed to show rooms to take advantage of Beijing tax incentives for small cars that expired at the end of 2010.

A raft of industry stimulus measures introduced at the beginning of 2009 helped China surpass the United States as the world's top auto market in that year. Some of those measures included subsidies to farmers who traded in old and gas-guzzling vehicles for more fuel-efficient models.

Now that the incentives have been stripped away, industry observers say demand for small cars, which made up roughly 60 percent of the country's passenger car sales, will decline this year, biting into the overall volume.