Car boom to slow with sub­sidy drop

Ve­hi­cle sales in 2016 see big­gest rise in three years

China Daily (USA) - - FRONT PAGE - By LI FUSHENG li­fusheng@chi­nadaily.com.cn

China’s pas­sen­ger ve­hi­cle sales last year saw their fastest growth since 2013, but an­a­lysts said the mo­men­tum will not con­tinue this year.

Sta­tis­tics from the China Pas­sen­ger Car As­so­ci­a­tion showed that deal­ers sold 23.9 mil­lion sedans, SUVs and MPVs in 2016, a 15.9 per­cent rise year-on-year, more than dou­ble the es­ti­mates of sev­eral in­dus­try or­ga­ni­za­tions, in­clud­ing the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers, made at the start of the year.

Cui Dong­shu, sec­re­tary­gen­eral of the CPCA, said the per­for­mance was mainly due to a 50 per­cent tax cut on cars with en­gines no larger than 1.6 lit­ters, and Chi­nese mo­torists’ en­thu­si­asm for SUVs.

The role of the tax cut was par­tic­u­larly ob­vi­ous in De­cem­ber, which saw the year’s high­est monthly sales of 2.76 mil­lion cars as peo­ple rushed to deal­er­ships be­fore the pol­icy ex­pired by the end of the year.

Yale Zhang, man­ag­ing di­rec­tor of re­search firm Automotive Fore­sight, said: “The pol­icy was like a huge road­side bill­board for the car in­dus­try, con­stantly re­mind­ing peo­ple that there are some mod­els they should con­sider buy­ing.”

De­spite the au­thor­i­ties putting in place a 25 per­cent tax cut for this year, this would still mean that cus­tomers will have to pay an ex­tra 5,000 yuan ($710) for mod­els priced at around 200,000 yuan, such as the Volk­swa­gen Sag­i­tar or Toy­ota Camry.

SUVs sales grew 43.6 per­cent year-on-year in 2016, the fastest-grow­ing seg­ment in the mar­ket.

One ex­am­ple of their pop­u­lar­ity was that Great Wall Mo­tor Co Ltd sold 80,495Haval H6 SUVs in De­cem­ber, which means one was sold in ev­ery 33 sec­onds. More than 580,000 H6 were sold in the year.

But ex­perts said that the growth rate would plum­met now that a huge num­ber of cus­tomers had fin­ished pur­chases in ad­vance and the over­all eco­nomic growth is some­what slow­ing down.

Cui ex­pected the fig­ure would fall to around 6.5 per­cent in 2017 while Zhang and John Zeng, man­ag­ing di­rec­tor of LMC Automotive Con­sult­ing (Shang­hai), gave an even less op­ti­mistic es­ti­mate of 2 to 3 per­cent for the year.

Zeng said the mar­ket would see neg­a­tive growth with­out the 25 per­cent tax cut on small en­gine cars that took ef­fect in Jan­uary.

How­ever, Zeng is against too much stim­u­lus, in­sist­ing that the mar­ket should have the fi­nal say.

He said the fa­vor­able poli­cies are like ath­letes us­ing drugs that pro­duce ab­nor­mally high but un­sus­tain­able per­for­mances.

WANG HAIBIN / FOR CHINA DAILY

Mod­els per­form at an auto show in Qing­dao, Shan­dong prov­ince.

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