China's domestic auto production and sales volume maintained a month-on-month downward trend in May 2011 with higher decline rates, according to the latest statistics released by the China Association of Automobile Manufacturers. The auto production and sales volume in the first five months were up 3 percent and 4 percent, respectively, from the same period a year earlier, lower than that of the first fourth months. The commercial auto sales volume even experienced a year-on-year decline.Consecutive declineThe domestic auto production and sales volume in April 2011 experienced its first month-on-month decline in 27 months. The situation worsened in May when auto production and sales volume experienced a month-on-month and year-on-year decline.Data from the auto association shows that the domestic vehicle production and sales volume in the first five months of 2011 reached 1.35 million and 1.38 million units, respectively, representing a month-on-month decline of 12 percent and 11 percent or a year-on-year decline of 5 percent and 4 percent. Zhu Yiping, assistant secretary-general of the China Association of Automobile Manufacturers, said that the reasons behind the month-on-month drop in auto production and sales volume for two consecutive months mainly include the end of auto purchase subsidies, the impact of the macro control policies, rising gasoline prices, new vehicle registration restrictions in some cities, the introduction of fuel efficiency standards and the impact of the earthquake in Japan.‘Not too bad’According to statistics from the China Association of Automobile Manufacturers, sales of China's domestically produced cars fell nearly 4 percent year-on-year in May. Sales of passenger cars dropped only 0.1 percent, and commercial cars, accounting for a quarter of total sales, fell more than 14 percent.For the sales volume of the four main types of passenger cars in the first five months in 2011, sales of sedans increased by more than 7 percent year-on-year, and MPVs by more than 13 percent and SUVs by more nearly 30 percent. Only sales of cross passenger cars fell nearly 8 percent. The reason behind the decrease in cross passenger cars is that all preferential policies, including the reduction of the vehicle purchase tax, automobile popularization in the countryside and trade-in policies, have all been canceled in 2011, and that the allowance for energy-saving cars cannot be granted because of low technology. Overall, the continued growth of sedans, SUV and MPV sales in May, and the increase of more than 7 percent in sedans sales in the first five months showed that the domestic car market is not too bad. Positive factors in the futureDong Yang, executive vice president of the auto association, believes that one of the reasons behind the downturn in the domestic passenger car market in the first half of the year is that the surge of car purchases in the fourth quarter of 2010 released part of the consumption capacity in advance. The vehicle consumption capacity will recover somewhat in the second half of the year. The central government's tightening monetary policy in the first half of 2011 restricted the purchasing power of the owners of small and mid-sized enterprises, who were the main buyer of compact cars and limousines. As the central government recently took measures to solve the financing difficulties of small and mid-sized enterprises, it will be easier for these enterprises to obtain loans in the second half of the year, which may improve the sales of compact cars and limousines. Due to a sharp slowdown in the auto industry, many automakers have reduced their inventories. According to statistics from the CAAM, the vehicle inventory of Chinese automakers totaled 661,200 units as of the end of May, down 145,500 units from the end of last year. Overall, the automobile inventory is following a downward trend, which may promote the auto sales in the second half of the year. Thanks to the smooth recovery of the world economy, China's auto exports are growing rapidly. According to statistics from the China Association of Automobile Manufacturers, China's auto exports totaled 72,100 vehicles in May 2011, up nearly 7 percent from the previous month and more than 53 percent from May 2010, breaking the record set in March 2008. The country exported 225,400 vehicles during the first five months of the year, up nearly 57 percent from the same period of last year. The growth in auto exports is expected to boost the sales of domestically produced vehicles.