Car sales to be strong despite unfavorable policies

Shenzhen Daily, January 4, 2011

THE country’s automotive market, the largest in the world, is expected to grow strongly this year in spite of the government’s decision to phase out some tax incentives and restrict new car sales in the Beijing city, analysts forecast.

General Motors, the largest foreign maker of cars and light commercial vehicles in China, Tuesday announced sales up nearly 29 percent year on year in 2010, to 2.35 million vehicles —- partly as a result of tax incentives that ended Dec. 31, when a partial purchase tax holiday for small cars was phased out by the government.

China has gradually eroded tax incentives for small vehicles introduced in 2008 to help the Chinese market recover from a temporary hiatus as a result of the global financial crisis.

Purchase taxes on vehicles with engines of 1.6 liters or below were cut from 10 to 5 percent in 2009, then raised to 7.5 percent last year and back to 10 percent for 2011. Some subsidies for rural car buyers were also phased out and the Beijing city announced sharp limits on the number of new license plates to be issued in 2011.

But most car market analysts expect continuing sales growth in low double digits this year, in spite of these measures. Kevin Wale, head of GM China, has said he expects 2011 Chinese motor sales to rise another 10 to 15 percent year on year.

Other Chinese vehicle makers have yet to report annual sales for 2010 but motor analysts expect total sales of about 17.5 to 18 million vehicles — up about 30 percent over 2009. Most car market analysts in China expect sales in the 20 million range for 2011.

“The incentives were gasoline on the fire of Chinese market growth, and that fire will continue to burn, fuelled by urban wealth accumulation,” said Bill Russo, of Synergistics, a Beijing motor consultancy, and former head of Chrysler in China. “The rate of growth may slow to a more sustainable level but it will still be enviably strong compared with the mature markets.”

Restrictions on Beijing car sales would also have limited impact, most analysts said, saying that Beijing accounted for only 5 percent of mainland car sales, which were growing most strongly in areas outside first-tier cities.(SD-Agencies)

Workers on a production line at Jiangxi Changhe Suzuki Car Co. Ltd. Auto sales in China exceeded 16 million units from January to November last year, according to the China Association of Automobile Manufacturers. The figure represented a 34.05 percent surge compared with the same period in 2009 and the total for the whole year was expected to hit 18 million. For two consecutive years, China has surpassed the United States as the world’s biggest car market in both output and sales of new vehicles. Xinhua

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