China Car Sales Growth Slumps In March As Tax Incentives Removed

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?

via http://ift.tt/2opa2ya Tyler Durden

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