End of tax break could put breaks on Chinese car sales
Daiwa Capital Markets says average daily sales of passenger vehicles in China rose 28pc in the first three weeks of July
Chinese car sales remained robust in July, according to new figures — but analysts are now warning of a possible U-turn in business, after a key tax break for buyers expires at the end of the year.
Average daily sales of passenger vehicles in China rose by 28 per cent in the first three weeks of July compared with the same period a year ago, an improvement from June’s 18 per cent, according to the latest data compiled by Daiwa Capital Markets.
China cut sales taxes by half on cars with engines of 1.6 litres or less last October in a move to help stimulate the car market. That tax cut is set to expire at the end of 2016.
Industry analysts at Haitong International Research, say they are projecting 10 per cent annual growth in passenger vehicle sales in China, further supported by the tax cut.
“However, that expires at the end of 2016 and then we forecast a 4 per cent fall in sales in 2017,” warned the company’s Ole Hui and Lily Li in a note.
We attribute this to consumers bringing forward their purchases to 2016 in order to benefit from the tax cut as well as the high base of comparison following rapid growth in recent years
The July sales uptick is also being driven by strong demand for sports utility vehicles, said Haitong, whose figures suggest SUV sales in China rose by 54 per cent to 6.3 million units in 2015, and by 44 per cent in the first half of 2016.