Automakers targets tax policy, Lunar New Year for China car sales decline

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China auto sales in January dropped by the largest margin since 2015 for a number of international automakers, with General Motors and Ford Motor blaming the roll back of a tax cut on small-engine automobiles and the Lunar New Year holiday.

Ford Motor stated on Thursday that its sales dropped 32 percent year-on-year, while General Motors stated sales declined 24 percent, making the biggest drop considering that the two automakers first began reporting information for retail sales of their automobiles in China in the second quarter of 2015.

China’s central government raised the purchase tax on automobiles with engines of 1.6 liters or less to 7.5 percent this year from an unique rate of 5 percent in 2016, a policy originally set up to shore up sales in a deteriorating economy. It prepares to return the rate to 10 percent in 2018.

“January was an unusual month with the earlier timing of the Chinese New Year holiday and the effect of the reduced tax incentive,” Ford said in a statement mentioning Peter Fleet, head of sales for Asia Pacific. “Sales of vehicles not affected by the tax incentive were strong.”

China yearly takes a one-week holiday for the Lunar New Year, which generally distorts sales in January and February as the dates differ each year.

On Wednesday, Toyota estimated a 18.7 percent fall in January sales, its biggest drop since March 2015.

Nissan reported a 6.2 percent sales decrease for the month, likewise mentioning seasonality and “the rush for vehicle purchase in December 2016” prior to the tax policy changed.

Honda, which has overtaken its US and Japanese rivals for the last two years, due to hot-selling sport-utility automobiles, said on Wednesday that sales increased 5.3 percent in January.

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