China Auto Sales Increase 29% as Demand Thins Dealer Inventory

  • Carmakers await government decision on extending tax cut
  • Sales may plunge next year if tax cut expires, automakers say

Passenger-vehicle sales surged 29 percent in China last month, led by small-car makers Geely Automobile Holdings Ltd. and Mazda Motor Corp., as consumers seeking to beat an expiring tax cut helped clear inventory on dealer lots.

Deliveries of sedans, minivans, sport utility and multipurpose vehicles to dealerships rose to 2.27 million units in September, the state-backed China Association of Automobile Manufacturers said Wednesday.

The government has so far stayed silent on whether it will extend a tax cut on purchases of vehicles with smaller engines beyond Dec. 31. Sales could plunge next year if levies are allowed to double to 10 percent, said Cui Dongshu, secretary general of the China Passenger Car Association, a separate industry group. A slump in demand would worsen a capacity glut and dent profit margins, according to Steve Man, an analyst with Bloomberg Intelligence.

“The expiration of the current purchase tax cut is encouraging consumers to catch the last bus and bring forward their car purchases,” said Huang Xiaowei, an analyst with Shenzhen-based WAYS Consulting Co. “Dealers are preparing stocks for the surging demand at the year-end.”

A gauge of vehicle inventory fell for a third straight month in September to the lowest level in two years, according to the China Automobile Dealer Association. Dealers of Japanese brands in August saw profits increase by 27 percent from a month earlier to 1,851 yuan per vehicle after scaling back discounts due to strong demand, according to WAYS Consulting.

Mazda said its sales in China jumped 49 percent in September from a year earlier, led by models including the Axela compact, which qualifies for the tax cut. Geely raised its full-year sales target after September deliveries surged 82 percent from a year earlier.

General Motors Co.’s sales gained 16 percent to 343,773 units, with deliveries of Cadillac sedans increasing 63 percent. Great Wall Motor Co.’s sales rose 49 percent to 97,685 units, with SUV deliveries reaching 87,627 units.