Tax reduction boosts Q1 car sales in China

A tax reduction on smaller vehicles and the introduction of new models have helped a 6.8 percent growth in Chinese passenger vehicle sales in the first quarter of this year, compared with the same period in 2015, for a total of 5.64 million units, industry data showed on Monday.

Toyota Motor Corp and Ford Motor Co were the two leading automakers delivering the most vehicles to Chinese customers in the first three months, the China Passenger Car Association said.

Toyota sold 291,000 cars in the January-March period, up 28 percent year-on-year. Ford sales rose 14 percent to 314,454 vehicles during the same period.

Niu Yi, senior manager of public relations at Toyota China, told China Daily that the sales performance of its mid-sized models and compact cars such as Corolla and Levin as well as the localization of its hybrid models helped sales growth.

Data from Toyota show that its local joint venture FAW Toyota Motor sold 155,700 cars in the first three months, up 34.3 percent year-on-year while another joint venture, GAC Toyota Motor, sold 110,600 cars during the same period, with 19.7 percent leap year-on-year.

In March, Toyota sold 100,500 vehicles, a 40.6 percent year-on-year increase.

Charlie Ma from Ford China said the continued high demand for sport utility vehicles contributed to the brand's sales boost.

Its SUV sales totaled 79,964 units in the first quarter, up 38 percent from the same period last year.

Zhang Yu, managing director of Automotive Foresight (Shanghai) Co, said a tax reduction for vehicles of 1.6-liter or below, which was implemented in October, was the main reason for the sales growth in the industry.

"It is like that government advertised for the auto industry. It is very effective and the customers also saw government's support on the low emission vehicles," Zhang said.

However, the 6.8 percent growth in sales is much lower than Zhang's expectation of a 25 percent growth.

"Normally the pace of the quarter should be similar to the previous one," he said, referring to the fourth quarter of 2015 when 6.57 million vehicles were sold.

"Economic conditions in the past few months postponed customers' purchasing decision, and led to a sales drop in the luxury car segment," Zhang said, explaining the stock market rout in January and the sharp rise in real estate in February have threatened the country's middle class, who also are the major buyers of cars, especially premium cars.

In March, passenger car sales rose 7.8 percent to 1.92 million, according to the association.

Great Wall Motors Co, a leading local SUV maker, sold 233,426 vehicles in January to March, a 5.7 percent year-on-year rise.

Earlier this year, the China Association of Automobile Manufacturers forecast that the growth rate of the auto industry in 2016 would be 6 percent.

The tax reduction last year was widely viewed as the savior of the industry.