China Car Sales Growth Slumps In March As Tax Incentives Removed

Tyler Durden's picture

As U.S. auto OEM's deal with 'plateau-ing' sales domestically, it appears increasingly likely that they're also about to suffer the consequences of some volume pull forward in China that artificially boosted 2016 sales. 

As the Wall Street Journal points out this morning, Chinese auto sales growth has slowed materially so far in 2017, with passenger car sales up just 0.59% in March versus 15% growth in 2016, after auto 'purchase taxes' were raised to 7.5% from 5% last year.  The tax cut was implemented in 2016 to boost slowing car sales and it seems to have worked 'beautifully.' The tax is expected to return to it's normal level of 10% at the end of 2017...unless more stimulus is deemed necessary in the interim, of course.

Car sales in China rose at their fastest pace in three years in 2016 but are expected to cool considerably this year, as a weaker sales-tax incentive puts pressure on demand. Buyers of cars with engines up to 1.6 liters last year paid a 5% purchase tax. This year, buyers of such cars will pay a 7.5% rate.

 

In January, the car manufacturers’ group predicted a considerably slower 5% rise in China’s car sales this year compared with 15% in 2016. A rush by consumers to benefit from a lower purchase tax drove record-setting monthly sales figures last year but cut into future purchases, dealers and analysts say.  Ford Motor Co. has said it expects sales growth in China to slow as the market matures.

 

Sales of vehicles, excluding those typically used for commercial purposes, grew 1.7% to 2.1 million units in March from a year earlier, the government-backed China Association of Automobile Manufacturers said Tuesday.

 

This marked a slowdown from the 6.3% growth in the first two months of the year. By comparison, sales grew nearly 10% in March 2016 from the previous year.

 

Car sales in China rose at their fastest pace in three years in 2016 but are expected to cool considerably this year, as a weaker sales-tax incentive puts pressure on demand. Buyers of cars with engines up to 1.6 liters last year paid a 5% purchase tax. This year, buyers of such cars will pay a 7.5% rate.

China Auto

 

Meanwhile, sinking sales have pushed Chinese auto inventories to multi-year highs.

China Auto

 

Of course, not all OEM's have been equally hurt by sinking sales as the luxury market has continued to perform well while South Korean manufacturers are suffering the consequences of geo-political disputes with their neighbor.

China’s luxury-car market continued to perform strongly. China sales helped propel Mercedes-Benz to its best-ever month, with March sales in China up 32.1% on year to 49,871 units, and quarterly sales up 37.3% to 144,947 units.

 

General Motors Co. , whose sales declined January through February, also enjoyed a record month, selling 345,448 vehicles in China—up 16% from a year earlier—through its various joint ventures. Cadillac sales rose 63% from a year ago. Toyota Motor Corp.’s China sales increased 11.9% in March from the previous year.

 

By contrast, South Korean manufacturers suffered from the fallout of a continuing political dispute between Beijing and Seoul over the latter’s deployment of a missile-defense system—a step the Chinese government has vehemently opposed.

 

The dispute has led to the boycotting of Korean products by many Chinese consumers, hitting sales of Hyundai Motor Co. and Kia Motors Corp. in China in March, analysts say.

One-time seasonal blip or more bad news for global auto OEMs?

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Stan Smith's picture

Wonder if the GM is offering 17% off it's vehicles in China as well?  

froze25's picture

Still waiting for deals on the Toyota Tacoma's I fear it will never happen, even used ones don't drop in price much.

Raffie's picture

Need the older vehicles before they got packed with electronics.

When the EMP hits only them old vehicles will be working or easy to fix to use. All the new high tech ones will be toast.

ToSoft4Truth's picture

Old like as before 1970's? 

 

Or 'old' as in unnew cars tweaked like in Mad Max?

money badger's picture

 

"China’s luxury-car market continued to perform strongly."

 

Because bankers need transportation, too.

ipso_facto's picture

Plenty of room on US dealers' lots!  Send 'em over!

biker's picture
biker (not verified) Apr 11, 2017 2:48 PM

Hyundai is a North Korean brand, founder born NK, manufactured nk industrial zone for south korea export to usa.
silly

American soldiers that defected and live in North Korea.
https://www.youtube.com/watch?v=wxQeVBndv3U
https://www.youtube.com/watch?v=yd2dCk3N8cE
https://www.youtube.com/watch?v=IEB6gKGHrNE

Silver Savior's picture

Yeah remove incentives at a time like this. Dumb bunnies.

hibou-Owl's picture

I would not believe anything a chinese businessman says! Totally dishonest, and incompetant.

Chinese warranty = fuck you I've got your money.

ToSoft4Truth's picture

You can't believe American business men either.

Trump is the first cite.

 

The second is F.

 

F says they only want to move production to China for the SUV's they sell in China....  but I bet this changes during the next depression.

 

"Ford's Lincoln to make SUVs in China in 2019 "