China April Auto Sales Rise 6.4% as Dealers Dangle Discounts – Bloomberg

Posted: Tuesday, May 10, 2016

China’s passenger-vehicle sales rose for the eighth time in nine months, with General Motors Co. and Toyota Motor Corp. reporting increased deliveries in April as dealers offered discounts to reduce stockpiles.

Retail sales of cars, SUVs and multipurpose vehicles climbed 6.4 percent to 1.72 million units last month, according to the China Passenger Car Association. Deliveries gained 6.7 percent to 7.36 million units in the first four months of this year.

Dealers in China offered average discounts of 18 percent off the automakers’ recommended selling price, according to estimates by Bank of America Merrill Lynch. Inventory levels — measured by the number of days a dealer needs to sell its stock — have remained above what’s considered healthy for eight consecutive months, data from the China Automobile Dealer Association showed. China’s government halved the purchase tax for smaller-engine models as of October to prop up a key pillar of the economy.

“Many car buyers in China have been accustomed to incentives,” said Steve Man, a Hong Kong-based auto industry analyst for Bloomberg Intelligence. “Automakers are also using marketing ploys like rebates and cheap financing to lure consumers into the showrooms and buy new cars.”

Sport utility vehicle jumped 36 percent last month and multipurpose vehicle sales rose 2.7 percent, while car sales declined 4.5 percent, according to the association.


A check with popular car-pricing website Bitauto showed dealers offering discounts of as much as 35 percent for models including Volkswagen AG’s Jetta and Polo compact cars, BYD Co.’s F0 and F3 sedans and Ford Motor Co.’s Fiesta.

GM’s sales in China rose 7.5 percent to 277,979 units last month, with SUV deliveries doubling from a year earlier. Toyota’s sales in the country climbed 9.2 percent to 101,100 vehicles. Among local carmakers, FAW Car Co. cited fierce competition in reporting deliveries that slumped 37 percent to 13,608 units.

Local automakers have increased their share of the passenger-vehicle market thanks to entry-level SUV models. Local brands’ market share rose by 1.8 percentage points in the first quarter to 45 percent, according to the China Association of Automobile Manufacturers.

China should refrain from using short-term policies such as last year’s purchase tax cut to stimulate auto sales, according to Chen Bin, who helped oversee the auto sector as head of the top policy making National Development and Reform Commission’s industry department until 2014. Such measures may result in overly fast expansion and increase the risks of a steep downturn once they expire, Chen said last month in an interview.


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