Chinese OEM plans for 2016: Tax break pushing growth to 6%

 According to the China Association of Automobile Manufacturers (CAAM), Chinese automobile sales volume (wholesale basis) will increase by 6% year-over-year (y/y) in 2016 to 26.04 million units (January 2016). Sales volume of passenger cars is expected to increase because of a tax break for small cars with an engine displacement of 1.6 L or less, potential demand in areas outside cities, and strong sales of SUV models. At the same time, while sales of commercial vehicles are forecast to continue to fall in 2016, the decline is expected to be smaller.

 LMC Automotive, a British research firm, predicts that sales volume of light vehicles (passenger cars and light commercial vehicles [LCVs] with a gross vehicle weight [GVW] of 6 t or less, including import vehicles) in 2016 will increase by 7.1% y/y.

 However, since the tax break for small passenger cars is scheduled to end in December 2016, the company predicts that demand for these vehicles will fizzle out. As a result of this, sales growth of passenger cars in China will slow in 2017.

 Due to these market conditions, automakers are more cautious than usual. In previous years companies set targets and plans to increase sales volume by 10 to 20% y/y. However, according to a survey of the strategies of major automakers in 2016, most companies plan to increase overall sales volume by approximately 8 to 11% y/y, which is slightly higher than the 6% increase that CAAM predicted.