Car Sales in China Rise Sharply During September

Tax breaks by the government along with dealer discounts were what fueled a jump of 29% in car sales for China during September. The increase was the largest since January of 2013.

Domestic and foreign automakers shipped over 2.27 million vehicles including sedans, minivans and crossovers to dealers in September, said the China Association of Automobile Manufacturers on Wednesday. In September of 2015, 1.75 million vehicles were shipped.

Thus far, in 2017, China’s sales of new cars have reached 16.75 million, an increase of 15% from the same period one year ago.

The sharp increase during September for car sales reflects how weak the China car market was during 2015.

Following four consecutive months of weak sales, the central government of China in October of 2015 halved its purchase tax of 10% on vehicles with engines that were 1.6-liter or smaller.

Since then sales have rebounded quite well. Over 70% of the cars that were sold in China have qualified for that incentive, which gives consumers a savings of as much as 10,000 yuan equal to $1,500 when purchasing a vehicle.

The government’s tax break will expire December 31, and car dealers continue to let potential customers know of the approaching expiration date.

In a major automobile marketplace in Shanghai, dealers posted countdown timers within their showrooms to remind buyers that time was running out on the tax break.

Across China, new cars were selling at 90% or less of their original tag prices during September, according to a local consultancy group focused on the automotive industry in China. The discounts have changed little over the last four months said the group.

Sales outpaced expectations in the market. During January, the automakers group predicted a rise of 7.8% for 2016, while another industry group predicted the increase would be 9.5%. Both have stuck to their numbers, due to the prospect of the fourth quarter slowing down.

One of the groups said growth during the fourth quarter would only be in the single-digits and added that if the government did not extend its tax break the growth rate could be zero during 2017.

Crossovers remained the best for September. Over 879,000 SUVs and crossovers combined were purchased during September in China, an increase of 54% over the same month last year.

Analysts said that growing affluence as well as increased awareness of using leisure time and its importance would keep pushing consumer to move from smaller vehicle to larger ones like the crossovers.

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