Policy, improved consumer confidence drive late-year surge: experts
China's vehicle sales in 2016 outperformed earlier expectations to end the year with double-digit growth, propelled by a sales surge in the second half of the year, industry data released on Thursday showed.
Total car sales in the world's largest auto market grew by 13.65 percent year-on-year to more than 28.03 million units, while passenger vehicles rose nearly 15 percent to 24.38 million, according to data released by the China Association of Automobile Manufactures (CAAM) on Thursday.
The growth rate beat the CAAM's earlier forecast of 6 percent to 7 percent growth.
Shi Jianhua, a deputy secretary-general at the CAAM, defended the organization's forecast made in the beginning of 2016, when the outlook for the industry was clouded by the overall economic conditions in China. Shi said "unexpected forces" helped the industry outperform predictions.
"Most of this year's sales were from the second half of the year and primarily involved smaller vehicles," Shi told a press briefing in Beijing on Thursday.
"Such trends were not clear in the beginning of the year," he said.
Car sales bottomed out in February, when they fell 0.86 percent year-on-year, and recorded double-digit growth starting with the third quarter, according to CAAM data. Sales for cars with engines smaller than 1.6 liters accounted for more than 70 percent of the total sales in the final few months of the year, according to Shi.
"What happened in the third quarter was the improvement in the overall economic conditions in China, with rising housing markets in many cities," Shi said, "and I think consumers had better confidence in spending on cars."
The economy grew by 6.7 percent in the third quarter of 2016 and the National Development and Reform Commission, the top economic planner, said earlier this week that full-year GDP growth probably reached 6.7 percent.
But the primary reason behind the sales growth was purchases of smaller cars made at the end of the year to cash in on an expiring tax cut, Xu Haidong, an expert at the CAAM, told the Global Times on Thursday.
"There was a lot of uncertainty about what happens with the tax break the date it is set to expire, and a lot of people rushed into the market to take advantage of the cuts," Xu said. That raised the growth pace for the year, he added.
A 50 percent cut to sales tax on cars with engines smaller than 1.6 liters was due to expire at the end of 2016, prompting what experts described as "panic purchases" that could cut into sales in 2017.
The government on December 15 announced a replacement tax break. Sales tax on small cars was cut by 25 percent to a rate of 7.5 percent from January 1, 2017.
On January 1, 2018, the tax will return to its statutory rate of 10 percent.
Still, the outlook for 2017 is not so bright, according to the CAAM, which forecast 5 percent growth for the full year, a significant drop from this year.
"We expect the overall economic conditions will continue to face slowdown pressure, and that will impact the auto market," Shi said at the briefing.
While potential trade disputes between the US and China after Donald Trump takes over the White House will not directly affect the Chinese auto market, they will affect the Chinese economy and in turn the car industry, Xu added.
