China passenger-car sales grow at quickest pace since April on incentives

China’s passenger-car sales in October rose at the fastest pace in six months as government incentives for fuel-efficient cars boosted buying in the world’s largest auto market.

Wholesale deliveries of cars, sport-utility vehicles and multipurpose vehicles increased 27 percent from a year earlier to 1.2 million last month, the China Association of Automobile Manufacturers said today in a statement.

China, the world’s biggest polluter, introduced a 3,000 yuan ($450) subsidy for energy-efficient vehicles in June to help cut smog. Models from Ford Motor Co., Hyundai Motor Co. and General Motor Co. are among those that qualify for the funding. Consumers may also be bringing forward purchases because they’re unsure if the government and carmakers will extend buying incentives into 2011, said Xu Minfeng, an analyst at Central China Securities Holdings in Shanghai.

“It is hard to forecast how demand will go next year if the government stops or partially stops extending stimulus packages to vehicle buyers,” Xu said.

Passenger-car sales surged 76 percent to 946,400 vehicles in October 2009 as the government cut the tax rate for small cars, according to data from the association

The nation’s total vehicle sales, which include trucks and buses, increased 25 percent to 1.54 million, according to the association.

Stockpile Period

Auto demand is expected to be strong for the rest of the year, analysts from Citigroup Inc., JD Power & Co. and IHS Automotive have said.

Citigroup analysts Gerwin Ho and Ross Wei raised their forecast for China’s 2010 car sales growth to 25 percent from 20 percent in a report on Oct. 19. Discounts from dealers and automakers rushing to meet year-end targets may spur sales, said Lin Huaibin, a Shanghai-based analyst at automotive consultant IHS Global Insight.

China’s auto sales may reach 17 million units this year, Zhu Hongren, the Ministry of Industry and Information Technology’s chief engineer, said Oct. 28.

China halved a small-car sales tax to 5 percent last year to spur demand, helping the country overtake the U.S. as the world’s largest vehicle market. The government raised the tax to 7.5 percent this year, hurting domestic carmakers such as BYD Co.

Shenzhen-based BYD’s October vehicle sales fell 13 percent from a year earlier to 40,578, the company said last week.

China may raise a vehicle-use tax on large passenger cars, according to draft plan posted on the National People’s Congress website on Oct 29. Cars equipped with engines of between 1.6 liters and 2.0 liters may be taxed 660 yuan to 960 yuan, according to the plan. Cars equipped with engines exceeding 4.0 liters may be charged 3,600 yuan to 5,400 yuan.

Current rates are 60 yuan to 660 yuan, according to a statement from the State Council issued in 2006.