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UPDATE 1-China auto sales resilient despite tax incentive rollback
March 10, 2017 / 6:47 AM / 6 months ago

UPDATE 1-China auto sales resilient despite tax incentive rollback

* Jan-Feb YTD sales +8.8 pct

* Tax cut on small-engine cars rolled back from Jan 1

* Green energy car sales rebound around 30 pct (Adds detail, background)

By Fang Cheng and Jake Spring

BEIJING, March 10 (Reuters) - China’s auto market grew 8.8 percent year-on-year in the first two months of 2017, its automakers association said on Friday, bucking expectations that consumer demand would suffer as a key tax incentive is rolled back.

February sales rose 22.4 percent from a year ago to 1.9 million vehicles, the China Association of Automobile Manufacturers (CAAM) told reporters.

Combined figures for the first two months of the year are viewed as a more reliable indication of the strength of the market as the timing of Lunar New Year holidays, which drag on sales, varies between January and February each year.

“In January and February, Spring Festival and other factors mean the data should not be overinterpreted,” said Xu Haidong, CAAM assistant secretary general.

“In March and April, the numbers will more clearly show relevant (market) conditions.”

Sales growth in the world’s second-largest auto market is expected to slow this year, after China cut its GDP growth target and as a tax incentive for vehicles with engines of 1.6 litres or below was reduced from Jan. 1.

CAAM predicted in January that 2017 sales would rise 5 percent this year, compared to 13.7 percent in 2016.

The purchase tax for small-engine cars climbed to 7.5 percent this year from 5 percent in 2016 after the government stepped in to stimulate slumping sales. The tax will rise to the normal 10 percent rate next year.

Executives at Volkswagen AG and other automakers had warned first quarter sales growth was set to be weak, after buyers late last year rushed to take advantage of the larger tax incentive before the Jan. 1 deadline.

Sales in the green energy vehicle segment jumped in February by around 30 percent year-on-year, rebounding from a 74 percent decline in January when subsidies were reduced 20 percent. Subsidy approvals, which automakers must reapply for this year, have also slowed amid stricter oversight. (Reporting by Fang Cheng and Jake Spring; Editing by Randy Fabi and Joseph Radford)

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