China’s car sales growth slowed because of tax cut rollback and Lunar New Year

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China’s car sales development slowed to 0.2 percent in January, the lowest since February last year as a rollback in tax cuts and the Lunar New Year holiday moistened sales.

Cars sales in the very first month of the year boosted to 2.52 million from 2.5 million automobiles in the same month in 2016, the China Association of Automobile Manufacturers (CAAM), stated on Monday.

The development substantially slowed from a 9.5 percent increase in December and a 16.6 percent increase in November.

Passenger car sales in January dropped 1.1 per cent to 2.22 million automobiles from the exact same period in 2016.

Yale Zhang, managing director at consultancy Automotive Foresight, stated January’s sales figure was better than market projections, as experts anticipated a decrease in year-on-year sales due to the Lunar New Year holiday.

This year’s Spring festival occurred in January, while it was in February in 2016.

“The better-than-expected car sales in January revealed that the effect of the decrease in tax cut is not as substantial as we have expected,” Zhang stated.

During October 2015, Beijing cut the tax levy on vehicles having 1.6-litre engines or smaller to 5 percent in an effort to enhance sales in the world’s biggest vehicle market. The tax break ended at the end of 2016, so since the start of this year it has actually risen to 7.5 per cent– though still below the regular rate of 10 percent.

In 2016, China’s vehicle sales grew by 13.7 per cent to 28.03 million cars, the fastest growth rate in last 3 years, buoyed generally by the federal government’s purchase tax incentive.

Zhang stated car sales development in the first quarter is anticipated to see significant downturn as lots of Chinese purchasers rushed to purchase automobiles last year at the lower tax rate.

“I expect only single-digit growth in the first quarter, and this is currently an optimistic forecast,” he said.

CAAM estimated that vehicle sales development for this year will slow to 5 percent.

Some automakers in China experienced an obstacle in sales in January. Ford stated the business and its joint endeavors in China sold 88,432 automobiles in the month, drop of 32 percent from the exact same period in 2016. Nissan stated its January sales in China dropped 6.2 percent.

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