Automakers blame tax policy, Lunar New Year for China sales drop

China vehicle sales in January fell by the largest margin since 2015 for several global automakers, with General Motors Co and Ford Motor Co blaming the roll back of a tax cut on small-engined vehicles and the Lunar New Year holiday.

Ford Motor said on Thursday that its sales fell 32 percent year-on-year, while GM said sales dropped 24 percent, making the biggest drop since the two automakers first began reporting data for retail sales of their vehicles in China in the second quarter of 2015.

China's central government raised the purchase tax on cars with engines of 1.6 litres or less to 7.5 percent this year from a special rate of 5 percent last year, a policy originally instituted to shore up sales in a weakening economy. It plans to return the rate to 10 percent in 2018.

“January was an unusual month with the earlier timing of the Chinese New Year holiday and the impact of the reduced tax incentive,” Ford said in a statement citing Peter Fleet, head of sales for Asia Pacific. “Sales of vehicles not affected by the tax incentive were strong.”

China annually takes a one-week holiday for the Lunar New Year, which typically distorts sales in January and February as the dates vary each year.

On Wednesday, Toyota recorded a 18.7 percent drop in January sales, its largest decline since March 2015.

Nissan reported a 6.2 percent sales decline for the month, also citing seasonality and “the rush for car purchase in December 2016” before the tax policy changed.

Honda, which has outstripped its US and Japanese competitors for the last two years, thanks in part to hot-selling sport-utility vehicles, said on Wednesday that sales grew 5.3 percent in January.

The country's automakers association predicts sales in China, the world's largest auto market, will grow 5 percent this year, slowing from a 13.7 percent rise in 2016 that was achieved on the back of the tax cut. 

– Nampa/Reuters