China's car sales surged in January from the low base of a year earlier, when the coronavirus began sweeping the world's largest auto market.
Retail sales of passenger cars rose 25.7% to 2.16 million vehicles last month compared with the same time a year before, the China Passenger Car Association said Monday, the strongest growth since September 2016.
Business shutdowns caused by Covid-19 hit the auto market hard early last year. Sales slumped by 20% in January last year and closed in December with a 7% decline for the year.
Although the CPCA earlier forecast that car sales would grow 7% in 2021, the market could see pressure in the second half, said Cui Dongshu, the group's secretary-general.
The stronger-than-expected recovery in the auto market is caught up in the recent chip shortage, forcing car makers including Volkswagen AG to cut production in China. Car makers are first using available chips for their most profitable and bestselling models, and analysts predict that the effects will linger until March. Many global brands will be more affected than local Chinese brands, Fitch Ratings analysts said.
Nissan Motor Co. said last week that its China sales grew 23.8% in January, while sales of Honda Motor Co. rose 4.8%.
Sales of electric cars surged 281.4% to 158,000 in January from a year earlier, though they dropped 23.9% month over month, the industry group said.
Last month, Tesla Inc. started delivering its second Chinese-made vehicle, the Model Y compact crossover vehicle. The company sold 15,484 Model 3s and Model Ys that were made in its Shanghai factory, CPCA data showed.
China's government-pushed electric-vehicle blueprint has encouraged more auto makers to build new models there. Ford Motor Co. said last month that it would build its flagship EV, the Mustang Mach-E, in China for the first time in an effort to reconnect with Chinese consumers.
Raffaele Huang contributed to this article.
Write to Erin Mendell at erin.mendell@wsj.com
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