China Car Sales Hit Record High on Tax Break

SHANGHAI—China's car sales hit a record monthly high in November as consumers rushed to benefit from a tax break before its scheduled expiration.

Foreign and domestic car makers delivered 2.59 million passenger cars—including sedans, crossovers and minivans—to dealers last month, the government-backed China Association of Automobile Manufacturers said on Monday, up 17% from in the year-earlier period.

However, compared with a 20% rise in October, the pace of November's gain represented a further slowdown from previous months, as consumers continue to bring forward purchases to qualify for the tax break on small vehicles. The incentive is due to expire by the end of this month.

China halved the 10% purchase tax on vehicles with 1.6-liter engines or smaller in October last year, following four straight months of slow sales. Car sales have since then significantly rebounded. In the period from January to November, China's new-car sales hit 21.7 million vehicles, a 16% increase from the same period a year earlier, when sales grew 5.9% from the year before.

Industry watchers are concerned that growth in the world's largest automotive market could stall if the tax break isn't extended. China's car market is vital to global auto companies as U.S. auto sales taper off and sales in other emerging markets such as Russia and Brazil shrink.

Ye Shengji, a deputy secretary-general of the auto-manufacturers' association, which is calling for the tax break to be extended, said Monday that the government had not given any indication that it would prolong the incentive.

Citigroup said in a recent note that if the tax break on small vehicle purchases isn't extended, it expects growth of the overall passenger car market to decelerate to 4% in 2017 due to the comparative high base in 2016.

Most car makers have reported strong results for November and are expecting to post record sales for this year. General Motors Co. said its China sales increased 7% year-over-year, Ford Motor Co. posted a 17% gain, and Nissan Motor Co.'s rose 11%.

"Ford is gaining more momentum in China each month and we are on pace for a record year in China," said Peter Fleet, a senior executive for the company's Asia Pacific region.

Chinese auto makers, whose consumers are more price sensitive, saw greater gains. Great Wall Motor Co., China's biggest maker of crossovers, said its sales rose 43% year over year, and Geely Automobile Holding Ltd., whose parent owns Volvo Cars, almost doubled its sales from a year earlier.

Quickening demand helped alleviate pressure on dealership inventories. According to an index created by the China Automobile Dealers Association, inventories of new vehicles on sale in November fell slightly from October, a five-month high.

Overall, sales of all motor vehicles, including cars, vans, buses and trucks, rose 17% in November from the same month a year earlier, to 2.94 million units. Year to date, China's motor vehicle sales are up 14% to about 25 million units. The auto-manufacturers' association now projects a 13% rise in sales this year, more than double the 6.1% gain it forecast at the beginning of the year.

-- Rose Yu and Lilian Lin

(END) Dow Jones Newswires

December 12, 2016 04:15 ET (09:15 GMT)

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