China Forecasts Vehicle Sales to Accelerate After Tax Cut

  • Registration quotas, slowing economy dented demand last year
  • Purchase tax on small passenger cars was lowered in Oct.

China’s vehicle sales are forecast to accelerate in 2016 after climbing at the slowest pace in three years as the government cut a tax on purchases of small passenger cars.

Total deliveries may gain about 6 percent to exceed 26 million vehicles, the state-backed China Association of Automobile Manufacturers said Tuesday in Beijing. That compares with the 4.7 percent growth last year to 24.6 million units, the smallest rate of increase since 2012.

The auto sales forecast comes amid extreme stock market swings this year that have revived concern over the Communist Party’s ability to manage an economy set to grow at the weakest pace since 1990. Last year, a stock-market rally first soaked up funds meant for large-ticket purchases then proceeded to depress discretionary spending in the ensuing rout.

There was a rebound in demand after the government in October cut the purchase tax on vehicles with engines 1.6 liters or smaller by half to 5 percent. The lower levy is effective through the end of this year.

— With assistance by Tian Ying

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