China auto sales increase 29% as demand thins dealer inventory

[BEIJING] Passenger-vehicle sales surged 29 per cent in China last month, led by small-car makers Geely Automobile Holdings Ltd and Mazda Motor Corp, as consumers seeking to beat an expiring tax cut helped clear inventory on dealer lots.

Deliveries of sedans, minivans, sport utility and multipurpose vehicles to dealerships rose to 2.27 million units in September, the state-backed China Association of Automobile Manufacturers said Wednesday.

The government has so far stayed silent on whether it will extend a tax cut on purchases of vehicles with smaller engines beyond Dec 31.

Sales could plunge next year if levies are allowed to double to 10 per cent, said Cui Dongshu, secretary general of the China Passenger Car Association, a separate industry group.

A slump in demand would worsen a capacity glut and dent profit margins, according to Steve Man, an analyst with Bloomberg Intelligence.

"The expiration of the current purchase tax cut is encouraging consumers to catch the last bus and bring forward their car purchases," said Huang Xiaowei, an analyst with Shenzhen-based Ways Consulting Co.

"Dealers are preparing stocks for the surging demand at the year-end."

A gauge of vehicle inventory fell for a third straight month in September to the lowest level in two years, according to the China Automobile Dealer Association.

Dealers of Japanese brands in August saw profits increase by 27 per cent from a month earlier to 1,851 yuan per vehicle after scaling back discounts due to strong demand, according to Ways Consulting.

Mazda said its sales in China jumped 49 per cent in September from a year earlier, led by models including the Axela compact, which qualifies for the tax cut.

Geely raised its full-year sales target after September deliveries surged 82 per cent from a year earlier.

General Motors Co's sales gained 16 per cent to 343,773 units, with deliveries of Cadillac sedans increasing 63 per cent.

Great Wall Motor Co's sales rose 49 per cent to 97,685 units, with SUV deliveries reaching 87,627 units.

BLOOMBERG