China sales vroom in 2016 for global automakers; dull 2017 looms

Fri Jan 6, 2017 9:26am EST
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By Jake Spring and Norihiko Shirouzu

BEIJING (Reuters) - Global automakers reported a surge in China sales last year as consumers rushed to take advantage of a tax cut on small-engine cars, but cautioned 2017 would be tougher for the industry as the incentive is rolled back and the broader economy slows.

Toyota Motor Corp, Ford Motor Co and Nissan Motor Co Ltd on Friday each reported sales growth of 8 percent or better for 2016, although Honda Motor Co Ltd led the pack with a 24 percent growth.

Toyota, which reported an 8.2 percent rise in China sales last year, sees growth slowing in 2017 as slightly higher taxes keep some buyers away from the world's biggest auto market. It expects to sell at least 1.2 million vehicles, steady from 2016.

"We are not being strictly volume focused. We would like to do so (increase volumes) while boosting car quality and keep our customer base satisfied with our products and service," a Beijing-based Toyota spokesman told Reuters.

While Honda expects to sell more vehicles in China this year, it forecast a significantly slower growth rate of 7.4 percent, roughly in line with a slowing economy.

Demand for cars in China got a shot in the arm in 2016 ahead of a planned expiry of lower taxes at year-end. Sales will come under pressure this year, but not fall sharply, given a decision to slowly roll back the incentive instead of abruptly ending it.

The purchase tax on cars with engines of 1.6 litres or smaller in China, at 5 percent now, will rise to 7.5 percent this year before returning to 10 percent in 2018.

Overall passenger car sales in China could have dropped 2 percent this year had the tax cut expired on Dec. 31, but are now expected to grow by 3-5 percent, consultancy Automotive Foresight said.   Continued...

A security agent guards Honda Avancier SUV after it was presented during Auto China 2016 auto show in Beijing April 25, 2016. REUTERS/Kim Kyung-Hoon/File Photo