China Auto Sales Gain Most in 10 Months After Tax Cut

Updated on
  • Car sales data reinforce better-than-estimated retail sales
  • Negative impact from stocks rout fading as market rebounds

China’s passenger-vehicle sales rose the most in 10 months after the government cut a car-purchase tax, benefiting automakers like Great Wall Motor Co. and adding to evidence that demand is rebounding in the world’s largest auto market after a summer slowdown.

Wholesale deliveries of sedans, SUVs and multipurpose vehicles climbed 13 percent to 1.94 million vehicles in October, according to the state-backed China Association of Automobile Manufacturers. Chinese carmakers outperformed the market, and boosted their share of sales by 2.1 percentage points from a year earlier.

The pickup in car demand reinforced official data released Wednesday showing retail sales increased faster than estimated in October, and comes as Jack Ma’s Alibaba Group Holding Ltd. set a new record for its annual Single’s Day shopathon. The role of consumer spending is increasing in China, as wage gains create a burgeoning middle class that fuels sales of everything from movie-theater tickets to smartphones and Internet services.

“The effect from the purchase sales tax cut has been positive and should last for a few months,” said Yang Jing, a Shanghai-based associate director at Fitch Ratings. “China’s economy is in transition and consumption will become a bigger part of its growth. Helping to boost auto sales is part of the government’s plan.”

The effect of the stock market decline that soured consumer sentiment earlier this year should fade as the market recovers, Yang said. China’s benchmark Shanghai Composite Index entered a bull market on November 5, after an unprecedented state rescue effort halted a $5 trillion crash and ordinary investors returned to the market.

2015 Forecast

Total vehicle sales, including trucks and buses, may increase 3 percent this year, according to Dong Yang, secretary general of the auto association. Industrywide deliveries climbed 1.5 percent in the first 10 months of this year to 19.3 million units.

Chinese automakers have gained this year after introducing cheaper sport utility vehicles that competed with similarly priced sedans from foreign brands. With buyers favoring the higher-riding and more spacious SUVs, global carmakers including Volkswagen AG are working on entry-level offerings for the growing segment. SUV sales surged 61 percent in October to 622,000 units, while sedan deliveries were little changed at 1.05 million.

Great Wall, the biggest seller of SUVs in China, boosted October sales by 14 percent. General Motors Co., Ford Motor Co. and Hyundai Motor Co. also reported gains in their October deliveries, reversing recent declines. The tax cut, which was effective Oct. 1 and covers about 70 percent of autos sold in China, is effective through the end of next year.

Retail data from a separate industry group last week showed auto sales increasing at the fastest pace in seven months.

— With assistance by Tian Ying, and Alexandra Ho

Before it's here, it's on the Bloomberg Terminal. LEARN MORE