China car sales growth slows to 16% as incentives end

Bloomberg News - China's passenger-car sales growth in January slowed from a year earlier after government incentives that boosted vehicle purchases ended in the world's largest auto market.

Sales of passenger cars including multipurpose and sport- utility vehicles increased 16.2 percent from a year earlier to 1.53 million last month, the China Association of Automobile Manufacturers said today in a statement. Sales in December 2010 gained 18.6 percent from a year earlier.

Demand grew at a slower pace after China reinstated a 10 percent sales-tax rate on small cars this year and phased out subsidies for vehicle trade-ins in rural areas. A consumption tax of 7.5 percent helped increase deliveries by automakers including General Motors Co., Volkswagen AG and Toyota Motor Corp. last year, as overall vehicle sales surged 32 percent to a record 18.06 million.

"A lot of people rushed to finish their purchases before the year-end to enjoy the tax incentives," said Jenny Gu, an analyst at J.D. Power & Associates in Shanghai. Gu estimates Chinese passenger-car sales will grow 10 percent this year.

China's economy grew 10.3 percent in 2010, the fastest pace in three years, as industrial production and retail sales picked up, the statistics bureau said Jan 20. The country has grown at an average 11.4 percent pace over the past five years.

Economic Expansion

The economy is expected to expand 9.5 percent this year, according to the average estimate in a Bloomberg survey of eight economists.

Total vehicle sales gained 13.8 percent in January to 1.89 million, the auto association said.

Sales growth will be between 10 percent and 15 percent this year, the association estimated last month. The pace may fluctuate in the first quarter as cities adopt measures to curb car ownership and ease traffic congestion, Gu Xianghua, the auto association's deputy secretary general, told reporters in Beijing on Jan 10.

Beijing announced in December it would cap total new car licenses in the capital at 240,000 this year, with 88 percent going to individual buyers.

Such measures have hurt sales at dealerships in the city. Deliveries at Beijing Asia Games Village Automobile Exchange, the city's biggest auto dealer, fell 75 percent last month, Guo Yong, one of its managers, said yesterday.

"Consumers are holding back buying because they haven't successfully bid for a license," Guo said. "Even if they have one, some are still waiting to see if there will be price cuts."

GM, VW Sales

Still, economic growth and a 3,000 yuan ($455) government subsidy for fuel-efficient vehicles will continue to support buying, said Lin Huaibin, a Shanghai-based analyst at IHS Automotive.

GM, China's largest foreign automaker, boosted sales in the country 22 percent to a record 268,071 vehicles last month, the company said last week. The Detroit-based automaker expects industrywide auto sales in China to increase as much as 15 percent this year, Tim Lee, president of its international operations, said Jan. 27.

Volkswagen, the second-biggest foreign automaker, boosted January sales of VW-brand cars in China and Hong Kong 29 percent to 175,000, the Wolfsburg, Germany-based company said Feb. 11.