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China’s vehicle sales growth slowed substantially in March, with year-to-date sales also decelerating despite the return of a tax on the purchase of smaller vehicles returning at a lower-than-expected rate.

Domestic vehicle sales totalled 2.5m in March, up 4 per cent year on year but notching a far slower rate of growth than February’s rise of 22.4 per cent, according to figures from the China Association of Automobile Manufacturers.

Year-to-date growth in sales was slower as well, coming in slower by about 2 percentage points from February to record a rise of 7 per cent during the first three months of the year. That was still up from a rise of just over 6 per cent in Q1 of last year, however.

Sales growth in 2016 was bolstered in part by a favourable basis for comparison thanks to lacklustre sales in 2015, and began to rapidly accelerate in the back half of the year as a tax break on purchases of small-engine vehicles introduced in October 2015 was expected to expire at the start of 2017 – potentially raising the duty from 5 per cent to 10 per cent.

That tax rate instead was raised to only 7.5 per cent, but it is possible that additional purchases late last year were spurred by the expectation of a full return to the 10 per cent norm, effectively front-loading purchases that might otherwise have been made in the first months of 2017 had consumers known the duty would only see a partial return.

Copyright The Financial Times Limited 2017. All rights reserved.
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