Auto Sales in China Set to Slow this Year

Although it’s currently the largest market for auto sales in the world, China’s voracious appetite for automobiles looks likely to slow in the coming months, according to the China Association of Automobile Manufacturers.

In 2009, the country’s auto sales grew by a whopping 46 percent, allowing it surpass the U.S. as the largest automobile market for the first time in history. Last year, sales were also robust, China witnessing a further 33 percent increase, to a total of 13.76 million passenger cars, fueled by government incentives.

However, that red hot growth may be set to taper off; the Chinese government has said that it will shortly announce new measures designed to curtail car congestion, including a decision by Beijing to significantly reduce the number of vehicle registrations it will issue for capital city residents (approximately 240,000, down from 750,000 last year), other major cities in China are set to follow Beijing’s lead.

Other factors that are likely to contribute to a cooling off in vehicle sales, include a higher purchase tax on cars with small displacement engines (which currently account for around 69 percent of total auto sales in China), along with scaling back excess capacity production and new policies designed to promote the development of more fuel efficient and alternative energy vehicles.

[Source: The Wall Street Journal]