China Sees Frisky Car Sales in January Amid Weak Expectations

Auto sales in China rose 11.6% year-on-year to 2.8 million units in January, statistics released Friday by the government-backed China Association of Automobile Manufacturers (CAAM) showed.

The growth was unexpected, as analysts and dealers were expecting weak sales this year in China's automobile market, the world's largest, due to the removal of tax incentives for auto buyers.

The January figure might be not representative as there were three more working days this month compared to last January, CAAM secretary general assistant Chen Shihua told Caixin.

CAAM, an auto industry association, pointed out that the market began to cool in the fourth quarter last year, and the trend is expected to continue.

At the end of 2017, China ended vehicle tax incentives for buyers, which had lasted for more than two years. The incentives offered in October 2015 first allowed a buyer of an automobile with engine displacement up to 1.6 liters to pay only a 5% purchase tax until the end of 2016, part of the central government’s efforts to boost the auto industry. And later, the government extended the incentives for another year with a higher rate of 7.5%.

The vehicle acquisition tax came into force with a normal rate of 10% in January 2001, and later that year China formally joined the World Trade Organization (WTO).

Dating back to 2009, the Chinese government offered similar tax incentives for auto buyers lasting for two years, a response to weak domestic demand caused by the global financial crisis, which saw annual auto sales shoot up by more than 30% year-on-year. However, the annual growth rates in 2011 and 2012 were both lower than 5%, a result of overdrawing market demands.

This year, CAAM forecasts an annual growth rate of 3% in auto sales, similar to last year.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)