Sept. 8 (Bloomberg) -- China’s passenger-car sales surged a record 90 percent last month, as tax cuts and government subsidies spurred demand, bringing the nation closer to overtaking the U.S. as the world’s largest auto market.

Sales of cars, sport-utility vehicles and multipurpose vehicles, rose to 858,300, the China Association of Automobile Manufacturers said in a statement today. Sales fell 6.2 percent in August 2008 as the Olympic Games damped demand.

This year, a 4 trillion yuan ($586 billion) stimulus plan has shielded China from the global recession, helping car sales jump at least 45 percent for four months in a row. Full-year sales of cars, trucks and buses may hit 12 million, the government said last week. Surging demand helped Geely Automobile Holdings Ltd., China’s biggest privately owned carmaker, to double profit in the first half.

“Sales growth is sure to continue in the coming months due to the incentives,” said Zhang Xin, an analyst at Guotai Junan Securities Co. in Beijing. Still, “everybody is worried about next year” and whether the government will introduce further stimulus measures.

Overall vehicle sales, including trucks and busses, rose 82 percent to 1.14 million. Commercial-vehicle sales climbed 60 percent to 280,200 units.

‘Keep Their Heads’

Full-year vehicle sales may rise 28 percent, based on a forecast made by Chen Bin, chief director of the industry coordination department at the National Development and Reform Commission, at a conference in Tianjin on Sept. 5.

He added that carmakers should “keep their heads” to prevent overcapacity as it was unclear whether growth was sustainable in the longer term.

In the first eight months, China’s vehicle sales rose 29 percent to 8.33 million. Passenger-car sales rose 37 percent to 6.22 million. Commercial-vehicle sales gained 11 percent to 2.1 million.

General Motors Co., the biggest overseas automaker in China, more than doubled sales in the country last month, as government subsidies in rural areas spurred demand for minivans. Its eight- month sales tally of 1.11 million vehicles surpassed the total for the whole of 2008.

Automakers are boosting investments in hinterland China, where rising incomes and government support are allowing many families to buy their first vehicle. That growth is also offsetting a slowdown in big cities, where the market is more mature, said Yale Zhang, Shanghai-based director of auto- advisory company CSM Asia.

The manufacturers now “attach great importance” to inner China, he said. “In the first-tier cities, you don’t see much growth -- single-digit or zero.”

U.S. Slump

In the U.S., vehicle sales dropped 28 percent to 7.1 million in the first eight months as the recession sapped demand. Detroit-based GM forecasts a full-year figure of 10.5 million. Ford Motor Co. predicts 10.5 million to 11 million. That’s down from 13.2 million last year and a 16.8 million average in the decade through 2007.

China’s auto market has closed a gap with the U.S. that stood at seven-to-one in 2001 because of surging economic growth. Overall vehicle sale have jumped at an average pace of 21 percent a year since 2001 as rising incomes make cars affordable to more people.

Last month’s gain in passenger-car sales was the biggest since a change in automakers association’s categorizations that came into effect in January, 2005.

In August, 2008, car sales dropped 6.2 percent to 451,300, the first decline in three years, as traffic controls put in place for the Beijing Olympics and the beginnings of the global economic slowdown damped demand.

For Related News and Information: Top transport news: TRNT <GO> China auto news: TNI CHINA AUT <GO> China auto sales: CNVSPSGR <Index> HCP M <GO>

Last Updated: September 8, 2009 05:22 EDT