Double-digit market growth forecast for 2016

A Haval H2s SUV is shown at the China (Guangzhou) International Automobile Exhibition in November. SUVs saw the fastest development in the China market in the first 11 months of this year. [Photo/Agencies]

Fueled by the favorable policy for small engine cars and people's enthusiasm for SUVs, China's automotive market is set for double-digit growth this year.

Statistics from the China Association of Automobile Manufacturers show a record number of 2.94 million cars were sold in November, bringing sales in the first 11 months of the year to nearly 25 million, more than the figure for the whole of 2015.

"If judged from current sales performance, I would say whole year growth will reach around 13 percent," said Xu Haidong, an assistant to the CAAM's secretary-general.

Xu said a driving force of the sales is the policy that halves the purchase tax on cars with engines no larger than 1.6 liters.

The tax usually stands at 10 percent of a car's sticker price.

"Some people are rushing to buy cars although they do not have immediate demands. They know the policy is to expire by the end of the year and they may spend thousands of yuan more without it," said Xu.

Consulting firm PricewaterhouseCoopers expects the growth rate to reach 14 percent by the end of the year with the help of the tax policy introduced in late 2015.

The CAAM data shows 15.6 million cars with small engines were sold from January to November, surging 22.5 percent year-on-year and accounting for 72.1 percent of total passenger car sales in the period.

By category, SUVs saw the fastest development. Nearly 7.94 million units were sold in the first 11 months of 2016, a 45.5 percent rise year-on-year.

Although more sedans were sold in the period, some 10.9 million, the growth rate of the sector was only 4.1 percent, much lower than the average growth rate for passenger cars, at 15.6 percent.

New energy vehicles were another highlight, with sales surging 60.4 percent year-on-year to 402,000 units from January to November.

Of them, electric passenger car sales totaled 217,000 units, a 95.3 percent rise year-on-year and three times the growth rate of plug-in hybrids.

Subsidies for new energy vehicle buyers are believed to be the main cause for consumers' enthusiasm with those cars.

According to China's current policy, people who buy an electric car are eligible for a 55,000 yuan ($7,913) subsidy, while those who buy a plug-in hybrid can receive 30,000 yuan from the central government in 2016. Local government subsidies vary by region.

The central government started offering subsidies in 2009 to stimulate the development of new energy vehicles, with 33.4 billion yuan earmarked for such purposes as of the end of 2015, according to the finance ministry.

The government is contemplating adjusting the subsidy scheme, and the latest version was speculated to be unveiled in mid-December.

Ye Shengji, a CAAM deputy secretary-general, said it may not be released so soon, but he said the goal of the latest policy is to ensure the steady and healthy development of the sector now that it has been growing at a high rate in the past several years.

China sold 330,000 new energy vehicles in 2015. The figure stood at 8,159 in 2011.