Why Chinese Car Sales Are Surging Faster Than Expected

Nov 10, 2016

China's auto industry body again adjusted upward its growth forecast for full-year 2016 vehicle sales on Thursday as October sales grew in double digits, with consumers moving to buy cars before a tax incentive expires at the year-end.

Auto sales growth in China will likely exceed 8% this year, said Ye Shengji, deputy secretary-general of the China Association of Automobile Manufacturers. This compares with the association's 7% forecast delivered last month and a 6% target at the beginning of the year.

Vehicle sales, struggling in a weakening Chinese economy, rebounded strongly in October last year when the government cut taxes on vehicles with engines with a displacement of 1.6 liters or lower.

"Regardless of small-displacement car tax cut being extended or not, because of policy uncertainty, throughout the fourth quarter we will see some preemptive buying," Ye said.

Sales rose 18.7% to 2.7 million vehicles in October from a year earlier, the association said.

That compares with a 26.1% increase in September and a 24.2% year-on year rise in August.

The tax cut has contributed to the better-than-expected 13.8% growth in the first 10 months of 2016.

However, the tax incentive is set to expire at the end of the year, with the association warning of a steep drop in growth in 2017 if the policy is not extended.

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