China's monthly vehicle sales post first back-to-back drop since 2015

[BEIJING] Chinese auto sales edged down 0.1 per cent from a year ago in May, registering two consecutive months of declines for the first time since 2015, as the rollback of a government tax incentive dragged on demand.

China auto sales fell to 2.1 million vehicles in May, the China Association of Automobile Manufacturers (Caam) said on Monday. In April, sales dropped 2.2 per cent, the steepest fall in 20 months.

In the first five months of 2017, sales grew 3.7 per cent from year-ago levels, the association said at a briefing in Beijing. This was smaller than the 7 per cent growth seen over January-May 2016 and also trails CAAM's forecast for five per cent growth this year.

China's auto market, the world's largest, recorded a 13.7 per cent growth in sales last year after the government halved the purchase tax on vehicles with engines of 1.6 litres or below to five per cent to stimulate demand.

The tax climbed to 7.5 per cent this year and will rise to the normal 10 per cent next year.

"Last year was just too strong and now the policy impact is fading away," said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.

"The growth (last year) overdrew some of the demand."

Sedan sales fell 9.3 per cent year-on-year in May, with sport-utility vehicles proving to be the lone bright spot for passenger vehicles, growing by 13.5 per cent as Chinese continue to trade up to larger vehicles.

Foreign brands that are strong in the small sedan segment have seen sales slow this year, with General Motors Co, Ford Motor Co and Volkswagen AG all recording lower sales in the first five months of the year.

Meanwhile, commercial vehicles posted rapid growth, led by lorry sales that grew 18.3 per cent, which are usually linked to the strength of the overall economy.

REUTERS