Chinese tax breaks to help steady global auto sales in 2016

Global automakers should see stable sales this year, particularly in China and small European countries like Spain, according to Moody’s Investors Service. Those sales, however, will likely fall in 2017 as Chinese tax breaks on passenger vehicles expire at the end of 2016.

Auto sales in China are expected to grow 6.5%, as the Chinese government cuts in half a 10% vehicle purchase tax on passenger vehicles with engines of 1.6 liters or smaller and provides supportive monetary policies, Moody’s reported Feb. 29. After those policies expire at the end of the year, unit sales in 2017 are expected to deflate to about 2.5%, it noted.

In the U.S. market, 2015 saw strong sales growth of 5.8%, but analysts at Moody’s expect that growth to drop in 2016 to 0.9% as “much of the pent-up demand has been met. U.S. growth is therefore likely to stay flat in 2017,”the firm said.

"Japanese car sales will likely pick up ahead of a planned doubling of sales tax to 10% in April 2017, which should lead to a modest 1.8% of unit sales growth in 2017 versus 0.3% in 2016," said Motoki Yanase, a Moody's vice president and senior analyst.

Auto sales growth in Western Europe is anticipated to remain fairly strong at 4.7% in 2016 and 3.1% in 2017, while much of the growth is expected in smaller countries like Spain and Italy, Moody’s said.

Meanwhile, Russia, Brazil and Argentina face economic headwinds that will challenge car sales in 2016. Russia could see unit sales declines of 15%, while Brazil and Argentina face the prospect of 10% sales declines, Moody’s projected. Economic challenges in these countries also make forecasting for 2017 very difficult.

- Nicholas Stern, NACM editorial associate

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