Economy

China's auto market to slow in 2011 By Li Fangfang (China Daily)

Updated: 2010-12-31 08:14

BEIJING - China's automobile market is expected to end its skyrocketing growth next year.

That's after the government decided to cease incentive measures and began to curb the booming auto market in big cities in a bid to ease congestion.



People look at a car in Guiyang, Guizhou province. Wu Dongjun / for China Daily

"Don't be optimistic for China's automobile market next year," said Jia Xinguang, an independent auto analyst based in Beijing. "At the expiry of the stimulus measures, especially the tax policy, there will be a restructuring in the auto market in terms of engine capacity."

Jia said that the automakers, especially domestic carmakers with models with engine capacities of 1.6 liters or less, will face a challenge in 2011.

"They have to make great efforts to improve quality and strengthen the brand of their cars," said Jia.

China's total vehicle sales surged to 16.4 million in the 11 months through November, according to the China Automobile Industry Association.

Whole-year sales are expected to hit 18 million units in 2010, making the nation the world's largest auto market for a second year.

The market increased by almost 30 percent this year, but analysts have predicted that it will slow to 10 to 15 percent or even lower in 2011, after Beijing recently launched a strict policy to curb car consumption.

The Ministry of Finance on Tuesday announced that China will stop the two-year consumption-tax cuts for smaller cars.

"Effective from January 1, 2011, a sales tax of 10 percent will be imposed on cars with engines of 1.6-liters or smaller, from 5 percent in 2009 and 7.5 percent currently," said the ministry on its website.

The government launched stimulus policies for the auto industry in 2009, including tax cuts for buyers of cars with engines of 1.6 liters or smaller, subsidies for rural car-buyers and incentives for trade-in cars. That move helped China surpass the United States as the world's largest auto market that year.

However, the ministry's statement did not say whether the 3,000 yuan ($454) rebates for fuel-efficient cars would remain in place in 2011 along with subsidies for farmers' trade-in vehicles.

Beijing municipal government last Thursday unveiled a plan to limit the number of cars sold in the city next year, to ease the traffic chaos.