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China auto sales rise most in 10 months after tax cut

Domestic automakers outperformed the China market in October, and boosted their share of sales by 2.1 percentage points from a year earlier. Photo credit: BLOOMBERG

BEIJING (Bloomberg) -- China's passenger-vehicle sales rose at the fastest pace in 10 months after the government cut a tax on purchases, benefiting carmakers like Great Wall Motor Co. and adding to evidence that demand is rebounding in the world's largest auto market after a summer slowdown.

Wholesale deliveries of sedans, SUVs and multipurpose vehicles climbed 13.3 percent to 1.94 million vehicles in October, according to the state-backed China Association of Automobile Manufacturers.

Chinese carmakers outperformed the market, and boosted their share of sales by 2.1 percentage points from a year earlier.

The pickup in car demand reinforced official data released Wednesday showing retail sales increased faster than estimated in October, and comes as Jack Ma's Alibaba Group Holding Ltd. set a new record for its annual Single's Day shopathon.

The role of consumer spending is increasing in China, as wage gains create a burgeoning middle class that fuels sales of everything from movie-theater tickets to smartphones and Internet services.

"The effect from the purchase sales tax cut has been positive and should last for a few months," said Yang Jing, a Shanghai-based associate director at Fitch Ratings. "China's economy is in transition and consumption will become a bigger part of its growth. Helping to boost auto sales is part of the government's plan."

The effect of the stock market decline that soured consumer sentiment earlier this year should fade as the market recovers, Yang said.

Chinese automakers have gained this year after introducing cheaper crossovers that competed with similarly priced sedans from foreign brands.

With buyers favoring the higher-riding and more spacious SUVs, global carmakers including Volkswagen AG are working on entry-level offerings to tap the expanding demand.

SUV sales surged 61 percent in October to 622,000 units, while sedan deliveries were almost unchanged at 1.05 million. Great Wall, the biggest seller of SUVs in China, boosted October sales by 14 percent.

General Motors, Ford Motor Co. and Hyundai Motor Co. also reported gains in their October deliveries, reversing recent declines. The tax cut, which covers about 70 percent of autos sold in China, is effective through the end of next year.

Retail data from a separate industry group last week showed auto sales increasing at the fastest pace in seven months.

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