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April 11, 2017

China’s best first quarter sales since 2014 are encouraging

Vehicle sales in China rose 7% in the first quarter, China's automakers' association said on Tuesday.

Vehicle sales in China rose 7% in the first quarter, China's automakers' association said on Tuesday.

The strongest January-March period since 2014 set up the world's largest market for a better than expected year, Reuters reported.

The news agency noted many in the industry had feared sales would be weak in the first three months after the government rolled back a tax cut on small engine cars on 1 January, 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% 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," Xu Haidong, a CAAM spokesman, explained to Reuters why it was not adjusting the 5% forecast.

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

Vehicle sales rose 4% year on year in March to 2.5m vehicles, CAAM told Reuters in Beijing.

The purchase tax for cars with engines of 1.6 litre capacity or below climbed to 7.5% this year from 5% in 2016 after the government stepped in to stimulate slumping sales. The tax will rise to the normal 10% 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, told Reuters in Shanghai on Saturday ahead of the CAAM figures.

"We expect the second, third and fourth quarter to show improvement."

Ford predicts China's overall auto sales will be flat or down slightly this year, Fields told the news agency. The automaker reports its March China sales on Wednesday.

General Motors reported last week its China sales in the first quarter fell 5.2% year on year with the automaker citing the impact of the tax cut reduction, Reuters noted.

The news agency report said automakers with a steady stream of new models, particularly in the hot-selling sport-utility vehicle (SUV) segment like Honda, continue to lead the market. It said its sales grew 16.6% in the first quarter.

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