Government tax breaks and the dealer discounts helped fuel 29% jump in China car sales last month for the biggest gain since January 2013.
SHANGHAI—Government tax breaks and the dealer discounts helped fuel a 29% jump in China car sales last month for the biggest gain since January 2013.Foreign and domestic automakers shipped 2.27 million cars including sedans, crossovers, and minivans—to dealers last month, the China Association of the Automobile Manufacturers said on Wednesday, up from 1.75 million in September 2015.
So far this year, China’s new-car sales are at 16.75 million vehicles, a 15% increase from the same period a year earlier.
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The sharp uptick in a September car sales reflects just how weak the market was a year ago.
In response to four straight months of slow sales, China’s central government in October 2015 split the 10% purchase tax on the vehicles with 1.6-liter engines or smaller.
Sales have since rebounded strongly. More than 70% of cars has sold in China qualify for the incentive, which helps the consumers a save up to 10,000 yuan, or about $1,500 when buying a new vehicle.
The tax break is scheduled to expire on Dec. 31, as car dealers aren’t shy about reminding customers.
In one of Shanghai’s major automobile marketplaces, dealers had all posted the countdown timers in their showrooms. “Don’t hesitate. Time is running out,” Zhu Huisheng, a dealer selling General Motors Co.’s Buick brand told customers. He offered a 10% discount for the Buick Envision crossover.
Nationwide, new cars were sold at the less than 90% of their tag prices in September, according to the Ways Consulting Co., a local consultancy focused on a Chinese automotive industry. The discount levels have barely changed in the past for four months, Ways said.
Sales have exceeded market expectations. In January, the auto manufacturers’ group predicted nearly 7.8% rise for this year, while IHS Automotive put its estimate at 9.5%. Both are sticking with those numbers, given the prospect for the slow fourth quarter.
“We expect the growth will drop to the single-digit rates in the fourth quarter. If Beijing doesn’t have to extend the tax break, we are afraid the growth will be zero in next year,” said Lin Huaibin, an analyst at IHS.
Crossovers remained the brightest spot in the month. More than nearly 879,000 sport-utility vehicles & crossovers combined were sold in China, 54% more than a year earlier, according to the manufacturers’ group.
Analysts said growing affluence & increasing awareness of leisure time & its value would keep driving consumers to shift to big cars such as crossovers.
Thanks to increasing the demand for cars, dealers maintained their inventories at healthy levels, said the China Automobile Dealers Association, a government-backed trade group. Nationwide, the average inventory at the dealerships was equivalent to 36 days of sales in August, & an initial examination of more than 20,000 dealers showed that unsold cars dropped further in September, the association said. Anything above 45 days is considered as unhealthy for dealers.