China’s total vehicle sales (XLY) climbed 9.6% in May to 2.3 million, followed by an 11.5% jump YoY (year-over-year) in April. According to the China Association of Automobile Manufacturers, rising consumer demand amid a strong domestic macroeconomic environment led to this strong gain. The sales in the first five months climbed 5.7% to 11.79 million units. April’s Beijing auto show might also have added to the growth in vehicle sales witnessed in May.
While still small, the growth in sales of new-energy vehicles remains very strong. In May, new energy vehicle sales grew 141.6% to 328,000 units. The first five months saw sales soar 124.7% year-over-year (or YoY).
Impact of the tax increase
China’s auto sales rose by a lackluster 3% in 2017 and 14% in 2016, boosted by a temporary reduction in sales tax. The China Association of Automobile Manufacturers expects 3% growth this year. The government reduced its sales tax from 10% to 5% in 2016 and 7.5% in 2017 and then reverted to 10% this year. Excluding any incentives, auto sales growth is likely to remain closer to 3%.