China October Auto Sales Up 11% After Tax Cut Boosts Demand

Updated on
  • Purchase tax cut helped sales after October implementation
  • GM, Hyundai reported gains in October sales after tax cut

Passenger-vehicle sales in China increased at the fastest pace in seven months after the government cut a tax on car purchases to boost sagging demand in the world’s largest auto market.

Retail deliveries of cars, SUVs and multipurpose vehicles rose 11.3 percent to 1.85 million units last month, the biggest monthly gain since March, according to the China Passenger Car Association. Retail sales through October gained 6.4 percent to 16.2 million units.

Effective through the end of next year, the tax cut lowered the levy on vehicles with engines 1.6 liters or smaller by half to 5 percent. China last unleashed stimulus measures in the midst of the global financial crisis, when car-buying subsidies helped push the country past the U.S. in annual sales in 2009. This time round, the stimulus was enacted after lobbying by the auto association, as a summer stock rout and slowing economic growth weighed on car sales.

“There’s the double bonus effect felt in October,” said Claire Su, Taipei-based analyst at Yuanta Securities Co. Ltd. “Automakers have been giving discounts to boost sales and the tax cut is another bonus. The demand recovery for autos is likely to persist in the fourth quarter, into the first quarter of next year.”

Sport utility vehicles continued to be the fastest-growing category. Deliveries last month surged 69 percent. Sales of multipurpose vehicles climbed 6.6 percent, while sedans fell 5.1 percent, CPCA said.

Showroom Footfalls

For Li Chunpei, a sales manager at a Hyundai Motor Co. dealership in Beijing, the tax cut has kept him busy after a few slow months.

Customer traffic at Beijing Jingxian Ronghua Sales Co. increased 20 percent last month while orders rose about 30 percent, Li said. Sales for one of the brand’s top-selling SUVs, the Tucson, surged threefold in October compared with September.

“Customers heard about the tax cut and were coming in to find out more,” Li said. “The tax cut saw prices go down quite a bit, and should continue to help sales in the months ahead.”

The buying interest helped boost Hyundai’s China deliveries, with October sales rising for the first time in seven months, up 8.5 percent from a year earlier.

General Motors Co.’s deliveries last month also recovered after declining for three consecutive months. Its China sales surged 15 percent from a year earlier on the back of demand for its Buick and Cadillac brands.

Sentiment Boost

“The recently announced government incentive for vehicle purchases helped boost buying sentiment starting in October,” Matt Tsien, president of GM China, said on Thursday.

Other companies, including Ford Motor Co. and Volkswagen AG’s Audi, said they’ve seen some positive impact from the purchase tax cuts. Volkswagen said its outlook for the fourth quarter of the year and next year remain positive, as the company has vehicles in the segment that could benefit from the reduction in levies.

Nissan Motor Co., the biggest Japanese carmaker by sales in China, said it will sell one million passenger vehicles a year for the first time in the country as it sees a recovery in demand, the company’s head of China operations Jun Seki said last month. Nissan’s deliveries in China surged 17 percent last month, putting the company on track toward its target.

— With assistance by Alexandra Ho

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