SHANGHAI (Bloomberg) - General Motors Co., Geely Automobile Holdings Ltd. and BYD Co. said the growing demand for automobiles in China outweigh the impact of the end of the fiscal incentives that boosted sales.
Geely and BYD, said today that new models and other government measures to support auto sales offset a higher sales tax announced by the government yesterday. Kevin Wale, president of GM China, said last week the nation's economic growth and a growing group of new car buyers will help increase deliveries in 2011.
"Some of the government incentives to retire, but there is tremendous underlying demand," Wale said in an interview Dec. 20.
Measures include consumption tax cuts, subsidies for rural development and incentives car buyers to trade in older models helped sales throughout China vehicle industry jumped 46 percent last year to 13 6 million and 34 percent during the first 11 months of 2010.
China, the largest market for automobiles, said Monday it would raise the tax on vehicles with engines of 1.6 liters or less than 10 per cent from 7.5 per cent next month. The tax was 5 percent in 2009.
China's total sales of vehicles, including trucks and buses rose to 16.4 million in the 11 months to November, the Association of Automobile Industry of China said earlier this month. Car sales could increase to 18 million units this year, making it the nation's largest global car market for a second year.
Rural car buyers
China has not said whether it will expand the rural development grants for car buyers or those trading in the old models in 2011.
While deliveries of the compact F3 Shenzhen-based BYD, the nation's largest passenger vehicle sales will grow at a slower pace in 2011, plans to add new models means there will be only a small impact on business growth from the tax increase, Paul Lin, a company spokesman said today.
Lawrence Ang, executive director of Hong Kong-based Geely, said automakers are intended to bring small cars to benefit from a more than 3,000 yuan ($ 450) subsidy for models of low fuel consumption. After some modifications, the smallest cars in China should benefit from the efficiency incentives based on early 2011, said in an e-mail sent before the government statement yesterday.
GM, Hyundai
GM, the largest foreign automaker in China, expects its domestic sales to increase by up to 15 percent in 2011, tracking the broader market, Wale said this month. Chinese sales of the company gained 33 percent this year through November.
Hua Foley, spokesman for Shanghai-based GM, said today that the company has not changed its forecast after the Chinese government confirmed that it was ending the tax break yesterday.
Other automakers downplayed the impact of higher taxes. Seoul-based Hyundai Motor Co. , Which sells more cars in China than in South Korea, said last week the elimination of a tax rebate would not have a big impact on their sales, while growth forecast to slow to 2.9 percent in 2011 .
Noh Jae-man, president of China's automotive business, said the shortage of production capacity may limit growth in 2011.
Ford Motor Co. is seen how the new policy affects the market, Irene Han, Shanghai-based spokesman for the company, said today. The automaker will continue to bring smaller vehicles that consume less fuel to China, Han said in an email today.
SAIC Motor Corp., the largest domestic carmaker, said the government's decision was expected by the industry. The manufacturer declined to comment on the impact on sales next year, said spokeswoman Judy Zhu said today.
Moreover, BYD, the automobile manufacturer based in Shenzhen backed by Warren Buffett, said today that it lost its 600,000 vehicle sales target for 2010. BYD is likely to sell 520,000 to 550,000 cars this year, the spokesman said Lin. BYD previously cut its target of 800,000 in August.
