China car sales grow at quickest pace in 3.5 years as tax-break expiry looms

Analysts predict loss of momentum after sales expanded 26 per cent in September from a year ago

PUBLISHED : Wednesday, 12 October, 2016, 7:07pm
UPDATED : Wednesday, 12 October, 2016, 10:52pm

China’s car sales expanded by 26 per cent in September from a year earlier, the fastest pace in more than three and a half years, as a soon-to-expire purchase tax waiver continued to entice customers in the world’s biggest automobile market.

But analysts now caution the momentum will lose steam in October as the bulk of orders have already been placed by buyers attempting to take advantage of the favourable tax policy, which runs out on December 31.

“The year-on-year sales growth is bound to decline in October, given that people started buying more when the tax break came into effect in October last year, and that had set a much higher base,”said Alexious Lee, head of China industrial research with CLSA.

Automakers delivered as many as 2.56 million vehicles to mainland dealers in September, up from 2.03 million a year ago, according to figures the China Association of Automobile Manufacturers released on Wednesday.

The year-on-year sales growth is bound to decline in October
Alexious Lee, CLSA

Traditionally considered a busy month for car dealers in China, September was the fifth straight month when figures compiled by the industry body pointed to a double-digit acceleration in car sales.

Millions of Chinese buyers have scrambled to order cars since Beijing last October slashed the purchase tax in half on small-engine vehicles in order to reinvigorate the multi-trillion dollar auto market. Buying sentiment had been hit hard by last summer’s stock market crash.

Deliveries of passenger vehicles, the segment singled out as the biggest beneficiary of the tax cut, saw a 29 per cent year-on-year surge to 2.27 million.

However, market watchers warned against getting “too caught up” with the growth figures.

“We believe growth strength will likely wane in October due to the high base, and payback of pre-bought demand coming in January 2017,”said Jefferies auto analyst Yeo Zhi Aik.

Demand for family-friendly SUVs remains robust as affluent Chinese households turn to more spacious and comfortable vehicles following the scrapping of the one-child policy. Sales grew at a staggering 46 per cent from the previous year, while SUVs delivered by domestic carmakers for the first nine months of the year skyrocketed by more than half to 3.37 million.

The Lavida sedan, made by Volkswagen and Shanghai-based SAIC Motor gained ground to become the top-selling passenger brand in China, while Nissan and Dongfeng Motor’s co-produced Sylphy snatched the second spot. VW’s small family car, the Jetta, lost its allure, slipping to fourth spot in the league table.

Great Wall Motors retains its crown as the maker of China’s best-selling SUV with its flagship Haval H6 brand, followed by GAC Group’s GS4 and the mid-sized luxury crossover Buick Envision built by SAIC General Motors Corporation.

In stark contrast to their stellar performance in the last few months, only 44,000 new energy vehicles were delivered to the country’s dealers in September. That represented year-on-year growth of 44 per cent, down from a near doubling of sales in August.

China’s top automotive industry body slashed its annual forecast for the country’s new energy vehicle sales last month by a steep 43 per cent after Beijing slapped penalties on several carmakers over subsidy fraud scandal worth almost 10 billion yuan.