State stimuli to boost sales but firms urged to listen to market

China’s car sales are expected to benefit modestly from the package of stimuli the authorities announced last month, but carmakers should do their part to survive the flagging market, according to analysts and industry insiders.

The National Development and Reform Commission, with other nine ministries, announced an action plan in late January to boost car consumption, following a 2.76 percent fall last year.

The fall, which is the first since 1990, dragged down overall retail sales in the country.

“The current slowdown in auto sales was a major factor in the decline in consumption growth,” said Liu Yunan, an NDRC official, at a press conference last month.

The measures include boosting sales of new energy vehicles, which grew over 60 percent to 1.26 million last year. They are expected to reach 1.6 million in 2019.

The authorities also propose subsidies on the purchase of small trucks and cars in rural areas, easing restrictions on pickups in cities and helping used car sales. Details have not been announced.

A nationwide tax cut on car purchases, a tool to boost sales, was not included in the package.

Carmakers, most of which have been affected, welcomed the move.

“We would always support any policies that would promote automotive growth,” said Ford China in a statement.

Jefferies Hong Kong analyst Patrick Yuan said the stimuli, although weaker than expected, will help the market see modest sales growth this year.

He added that the measures were introduced to let the market recover more by itself.

He said there were emerging signs of an early recovery before the measures were announced: retails sales in the first three weeks of January were up 3 percent from the same period last year.

A report by Shenwan Hongyuan Securities estimates that seven million cars are sold in rural areas every year, representing 25-30 percent of the whole market.