China's Car Sales Cruise Downhill in April

By Trefor Moss Features Dow Jones Newswires

China's passenger-car sales in April saw their biggest decline in nearly two years as the world's largest car market continued to feel the effect of a higher sales tax, though several foreign auto makers bucked the trend by logging sales increases.

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Total vehicle sales fell 2.2% year over year to 2.08 million, the government-backed China Association of Automobile Manufacturers said on Thursday.

Passenger-car sales declined by 3.7% to 1.72 million, their biggest fall since July 2015. Sales of commercial vehicles climbed 5.3% to 362,000.

The Chinese and U.S. auto industries saw record sales in 2016 but global auto makers are now grappling with cooling demand for new vehicles in both markets.

Car sales in China rose at their fastest pace in three years last year, but are expected to slow as a weaker sales-tax incentive puts pressure on demand. Purchases were brought forward in 2016 as consumers rushed to take advantage of the lower tax, analysts say.

Buyers of cars with engines no larger than 1.6 liters last year paid a 5% purchase tax. This year, buyers of such cars will pay a 7.5% rate.

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Overall sales slowed by nearly a fifth compared with March. China's main annual auto show was held in Shanghai in April and usually dents monthly sales, said Yale Zhang, managing director of Automotive Foresight, as some potential buyers delay their purchases until after new vehicles are launched at the show.

Despite a slow April, the Chinese auto market grew 4.6% in the first four months of the year compared with the same period in 2016, with 9.09 million vehicle sales. Most analysts have been predicting growth of roughly 5% in 2017, a slower rate than in previous years, as the China market matures.

The auto manufacturers' association forecasts "stable growth" of 5% this year, said Shi Jianhua, the organization's deputy chief secretary. Higher inventory levels remain a challenge for dealerships, but recognition among auto makers that the market has slowed should result in them taking measures to adjust, said Chen Shihua, a senior association official.

"Everyone is cautious about the market," Mr. Chen said.

Some foreign car makers reported strong April sales, despite the sluggishness of the overall China market.

Toyota Motor Corp.'s China sales increased 7.2% in April to 108,300 vehicles, with sales in the first four months of the year up 3.1% to 404,400 vehicles, the company said.

Volkswagen AG reported 4.3% sales growth in April, with 226,000 vehicles sold. The German auto maker's sales fell by 1.9% in the first four months of the year, however, to 921,600.

Ford Motor Co. had a strong April in China, with sales up 11% to 93,967. But 2017 has been tough for Ford overall, with China sales down 12% at 349,228 vehicles.

General Motors Co. saw its sales fall 1.9% in April to 272,770 vehicles, with year-to-date sales down 4.5% to 1.19 million vehicles.

Sales of sport-utility vehicles grew 18% in the first four months of the year to 3.07 million. However, the growth rate of this popular segment is slowing even as more SUV products enter the market; and for that reason some local auto makers that have become over-reliant on SUVs are struggling to deliver growth, Mr. Zhang said.

Lilian Lin contributed to this article.

Write to Trefor Moss at Trefor.Moss@wsj.com

(END) Dow Jones Newswires

May 11, 2017 06:27 ET (10:27 GMT)