'Panic' purchases boost industry sales in October
Experts on Thursday called for the Chinese government to extend a tax cut on small-engine cars that is due to expire at the end of the year, arguing that ending the incentive would hurt vehicle sales and manufacturers next year.
The comments came after consumers rushed to buy eligible models to take advantage of the tax break. That surge significantly boosted passenger car sales in October.
In the month, sales of passenger cars surged 20.29 percent year-on-year to about 2.34 million units, an increase of 3.34 percent month-on-month, according to data released by the China Association of Automobile Manufacturers (CAAM) on Thursday.
The main force in the sales surge in October was small-engine cars, Ye Shengji, deputy secretary general of the CAAM, told the Global Times on Thursday.
About 73 percent of total car sales in the month came from vehicles covered by the tax break, which means engines of 1.6 liters or smaller, according to Ye.
"That is a very significant increase, compared with the segment's normal proportion of total sales, which is usually around 40 to 50 percent," Ye said. "Much of it was from advance or even 'panic' purchases before the incentives are phased out."
In a bid to revive the car industry, the government in late September last year cut the 10 percent purchase tax by half on cars with engines smaller than 1.6 liters. The cuts are due to expire at the end of this year, unless the government takes further action.
Experts said an extension is necessary to help the passenger car industry and guide it toward being more environmentally friendly.
If the tax cuts end on schedule at the end of this year, sales of passenger cars in general will be dragged down significantly next year, Zhang Yu, managing director of Automotive Foresight (Shanghai) Co, told the Global Times on Thursday.
Sales might flatten out or even contract, according to Zhang.
He said even more consumers would rush into the market to buy cars to take advantage of the incentives for the rest of the year, pushing up sales growth rates.
"But early next year, car sales would naturally come down, and such ups and downs would be hard for car manufacturers to deal with," Zhang said. Domestic car companies would be hurt the most, because "most domestic brands are focused on cars with engines smaller than 1.6 liters," he noted.
Therefore, it is necessary for the government to extend the tax cuts into the next year, according to Zhang. Ye also said that an extension or "gradual process" to phase out the policies would be of great help to the Chinese car industry and consumers.
Various government agencies, including the Ministry of Finance and the National Development and Reform Commission, the top economic planner, are considering further action with regard to the incentives, according to Ye.
The CAAM also noted sales increases for sport utility vehicles (SUVs) also contributed largely to the sales surge in October. Sales for SUVs rose 43.34 percent year-on-year to 896,000 units in October, according to the CAAM data.
