Auto sales in China grew 4.4% in April compared to the same month a year ago, to just over 2 million vehicles, for the first time in nearly two years.

Commercial vehicles, including heavy trucks, helped pull that figure into positive territory. Sales of such vehicles increased 32% in April while passenger car sales dropped 2.6%.

The bump provided some much-needed relief for the world's biggest market, driven by increased demand for commercial vehicles, according to data published Monday by the China Association of Automobile Manufacturers (CAAM). It's the first month that sales have grown since July 2018.

CAAM attributed the rebound mainly to Beijing's ability to bring the coronavirus pandemic under control in China, along with government stimulus measures — including handing out cash subsidies to encourage people to buy cars.

However, the trade group believes that industry is still in serious trouble this year and in addition, the heavy use of cashback deals and gifts by dealers to entice consumers, has industry watchers worried over a return to price wars.

Feng Xingya, general manager of state-owned automaker GAC which has partnerships with Toyota and Honda Motor Co, believes a bruising price war is on the cards.

“When there is not much demand amid a pickup in production, price competition will obviously increase,” he told an investor conference in April, adding GAC “cannot be afraid of or refuse to enter any price war.”

Alan Kang, a senior LMC Automotive analyst told Reuters that “offering gifts and cashbacks suggests a lack of substantial customer demand”, adding more brands could offer incentives across more segments to maintain market share.

Even with April's sales spike, the market remains weak. Just 5.8 million vehicles were sold in the first four months of 2020, a 31% drop from a year earlier.

Any momentum from pent-up demand is expected to peter out by the end of May. After that, the outlook for consumer spending is bleak as the coronavirus pandemic continues to hammer the global economy, including China’s exports.

CAAM forecasts that sales could drop by 15% to 25% compared to last year, depending on how effectively the pandemic is controlled worldwide through the rest of 2020. China's car market was in a serious slump long before the coronavirus pandemic. Car sales fell more than 8% in 2019 after sliding nearly 3% the year before.

Sourced from Reuters, CNN