China first-quarter auto sales strongest since 2014 despite tax cut rollback

Tue Apr 11, 2017 4:14am EDT
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By Lusha Zhang and Jake Spring

BEIJING (Reuters) - China auto sales grew 7 percent in the first quarter, China's automakers' association said on Tuesday, with the strongest January-March period since 2014 setting up the world's largest auto market for a better-than-expected year.

Many in the industry had feared that sales would be weak in the first three months after the government rolled back a tax cut on small engine cars on Jan. 1, contributing to expectations for a slowdown in 2017 sales.

But first-quarter growth outpaced the China Association of Automobile Manufacturers' (CAAM) prediction in January that auto sales would grow 5 percent in 2017, and the market is expected to improve further as the year progresses.

"Our current attitude should be cautiously optimistic, as in reality we still feel there is pressure," said Xu Haidong, a CAAM spokesman, explaining why it was not adjusting the 5 percent forecast.

"This is because of policy changes, as well as related economic trends and other reasons."

Vehicle sales rose 4 percent year-on-year in March to 2.5 million vehicles, CAAM told reporters in Beijing.

The purchase tax for cars with engines of 1.6 litre capacity or below climbed to 7.5 percent this year from 5 percent in 2016 after the government stepped in to stimulate slumping sales. The tax will rise to the normal 10 percent rate next year.

"We've always planned for the fact that (in) the first quarter there would be payback from the pull forward of sales into the fourth quarter (before the incentive was reduced)," Mark Fields, chief executive of Ford Motor Co (F.N: Quote), told reporters in Shanghai on Saturday ahead of the CAAM figures.   Continued...

FILE PHOTO: Cars are built at a BYD weld line in Shenzhen, China May 25, 2016.   REUTERS/Bobby Yip/File Photo