April 12, 2016 / 8:30 AM / in 3 years

UPDATE 1-China vehicle sales to increase 5 pct y/y in Q2 - industry association

* Sales rose 6 pct y/y in Q1, matching annual target

* MPV, commercial vehicle segments strengthen

* Green car sales growth falls (Adds association comments, context)

BEIJING, April 12 (Reuters) - Vehicle sales in China are expected to grow 5 percent in the second quarter of 2016, China’s automakers association said on Tuesday, slowing slightly from the first three months of the year.

The world’s largest auto market grew 6 percent in the first quarter from a year earlier, the China Association of Automobile Manufacturers (CAAM) told a briefing in Beijing. That was in line with the association’s overall target for the year.

“For April, or even the second quarter, we are confident that the good performance from the first quarter will continue,” said Yao Jie, the association’s Deputy Secretary-General.

The association is confident second quarter sales will be up 5 percent, he said.

China’s market has entered a period of unprecedented uncertainty, analysts say, as the economy expanded at its slowest pace in 25 years in 2015.

Car sales nearly contracted last year before snapping back thanks to a tax cut on small engine vehicles that extends until the end of 2016.

In March, stronger demand for multi-purpose vehicles and commercial vehicles sales contributed to the 8.8 percent rise in overall sales for the month, Yao said.

March’s growth compares with a 0.9 percent year-on-year decrease in February, and a 7.7 percent rise in January.

A government tax cut on small engine vehicles enacted in October that carries through the end of the year is continuing to lift sales, association officials said, with that segment growing 10.7 percent year-on-year last month.

Growth in new energy vehicle sales, a bright spot throughout last year’s slowdown, fell drastically as it is unclear whether many local governments will renew subsidies this year.

Sales of “new energy vehicles”, pure electric and plug-in hybrid cars, grew only 46 percent, the first time in at least a year CAAM has reported monthly growth of less than 100 percent in the segment.

The association said last month that many local governments have delayed releasing new subsidy policies for green cars this year, and the subsequent uncertainty over whether subsidies would decrease or continue at the previous rate hurt sales. Local governments generally offer subsidies in addition to those given by the central government.

Yao said Tuesday he hopes to see more clarity in the new energy vehicle market and that he was satisfied with the increase in March.

Reporting by Winni Zhou and Jake Spring; Editing by Sherry Jacob-Phillips and Simon Cameron-Moore

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