2017 Seen as “Challenging” Year for China’s Auto Market

New-car demand in China is cooling as sales growth falls below the pace of production, says LMC Automotive.

The market analysis firm, pointing to China Passenger Car Assn. data, says average dealer supplies of unsold vehicles at the end of February were at 2.25 months compared to the norm of 1.5 months. Some producers are sitting on four-month inventories.

LMC says much of the sales slowdown is a payback effect following the government’s 50% cut in a purchase tax discount plan that encouraged sales of small-engine vehicles. Registrations of such models plunged 63% to a four-year low in January.

The firm notes that the central government plans to revise regional policies that have restricted used-car sales. LMC says the changes will help strengthen the market by linking new-car retailing with used-car sales and old-car scrappage.