Auto sales my rebound in China in 2016.

1. China Capitulates:
Another Round of Auto Stimulus
Steve Man and Ji Shi
Bloomberg Intelligence analysts

2. China’s Latest Tax Cut May Fuel SUV, Local-Branded
Auto Sales

3. Auto sales in China may rebound next year, helped by a tax cut
to 5% from 10% for small vehicles with engines up to 1.6 liters.
Local automakers such as Great Wall and Wuling may get the
biggest boost, given 83% of their sales are from small cars.
Japanese brands, known for economy vehicles, have the lowest
mix of small-car sales in China. SUV sales may surge further,
with many automakers offering compact SUVs that qualify for
the incentive. Growth is unlikely to be as high as in 2009, with
the same tax cut.

4. Chinese Auto Brands May Gain Market Share
After Purchase Tax Cut

5. Chinese auto brands may keep capturing market share thanks to
the latest government incentive. On Oct. 1, China’s new-vehicle
purchase tax falls to 5% from 10% for 1.6-liter engines and smaller.
Small vehicles account for the majority of sales for domestic
automakers like Wuling, Baojun and Geely. A similar tax cut in
2009 helped local brands bolster their market share to 45% from
40% within a year. Chinese brands accounted for 40% of the
nation’s vehicle sales for the year-ended August.

6. Subsidies to Boost Profits Amid Decline in Car Prices

7. The Chinese government’s plans to extend auto subsidies to rural
buyers, on top of the sales-tax cut, will spur new-vehicle sales. That
will boost production, lower unit cost and raise profits for carmakers.
Passenger-vehicle sales have accelerated since the sales tax was
halved to 5% in October. Under the 2009 auto stimulus, rural
residents who replaced their vehicles received 3,000-5,000 yuan
($470-$780) . The incentive was raised to as much as 18,000 yuan
in 2010.

8. Great Wall, Wuling Small-Car Lead May Benefit Most
From Tax Cut

9. More than 90% of Great Wall and Wuling’s vehicles sold this year
were equipped with engines 1.6 liters or smaller.
That may allow the nation’s SUV and minivan leaders to benefit most
from a tax cut for small cars that took effect on Oct. 1. Guangzhou
Auto’s own-brand vehicles may not gain as much from the incentive
because 47% of its sales are from vehicles with engines larger
than 1.6 liters, mainly Trumpchi SUVs. About 83% of overall
domestic-brand sales are small vehicles vs. foreign brands’ 59%.

10. Honda, Japanese Automakers Are Least Exposed
to Tax Cut in China

11. Product portfolios of Japanese automakers in China are the least
exposed among all brands to the latest auto tax cut, given that 51%
of the vehicles they sold this year were equipped with engines larger
than 1.6 liters.
Honda, a partner with Dongfeng and Guangzhou Auto in China,
only got 20% of sales from small cars that qualify for the tax cut,
close to the ratios of luxury carmakers. A wide range of small cars
at Volkswagen and Ford may help those companies revive sales
and gain market share.

12. China Auto Tax Cut May Boost Mercedes, Audi Sales
More Than BMW

13. Luxury marques such as Audi and Mercedes-Benz may increase sales
in China due to the latest government incentive. Beijing-Benz, the
venture between Daimler and BAIC, got 14.8% of sales from vehicles
with engines up to 1.6 liters, which qualify for a 5 percentage-point
tax cut.
FAW-VW’s Audi had a similar ratio of 15.4%. The stimulus may have
less impact on BMW-Brilliance, as only 5.4% of its vehicles sold were
equipped with such engines.

14. China Autos Unlikely to Repeat 2009 Growth
Even With Tax Cut

15. Auto sales in China are unlikely to match their 53% surge in 2009,
even with a similar tax cut for small vehicles, because of new-vehicle
registration limits and higher vehicle density.
Auto sales in five large cities, including Beijing and Shenzhen, have
been capped since 2011. They accounted for about 13% of nationwide
sales in 2009. China’s passenger-vehicle density has tripled since
2008, indicating slower growth potential. Still, auto sales are likely
to rebound in the short term.

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