China April vehicle sales notch steepest fall in 20-months on tax hike

Car dealers and customers walk at a second-hand car market near a newly-built residential area in Hefei, Anhui province, China January 26, 2013.REUTERS/Stringer

BEIJING (Reuters) - Chinese auto sales fell in April by the steepest in almost two years, the automakers’ association said on Thursday, as a tax increase on small-engine cars from the beginning of the year discouraged buyers.

Vehicle sales in China, the world’s largest auto market, fell 2.2 percent to 2.1 million in April, compared to a 4 percent rise in March, data from the China Association of Automobile Manufacturers’(CAAM) showed. The drop was the sharpest since sales fell 5 percent in August 2015, data showed.

In the first four months of the year, sales grew 4 percent, slower than the 5 percent increase forecast by the CAAM for all of 2017.

“Demand was weak and this caused stock piles in April,” said Chen Shihua, a CAAM spokesman.

The purchase tax for cars with engines of 1.6 liter capacity or below 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.

Industry executives and analysts had warned that the tax would hurt sales in early 2017.

China targets sales of 35 million vehicles A YEAR by 2025 and new energy vehicles to make up at least one-fifths of that total.

Reporting by Muyu Xu, Yifan Qiu and Jake Spring; Editing by Miral Fahmy