After two years of spectacular growth, China's auto market is quickly losing steam. And low-priced domestic brands are getting get hit hardest.
In February, sales of passenger vehicles rose just 2.6 percent from a year earlier, according to the China Association of Automobile Manufacturers.
Right now the big losers appear to be the domestic Chinese automakers; the big winners could be German luxury brands. That's because the central government this year ended its scrappage incentive and raised the sales tax on small cars to 10 percent, up from 7.5 percent.
The new policy hurt domestic Chinese brands, whose overall sales declined 4.3 percent in February. Hardest hit were microbus makers such as Changan and Chery that have aggressively expanded microbus production since 2009. Last month, sales of the all-purpose vehicles -- which might be used to haul geese to market in the morning, then the wife and kids in the evening -- plunged 12.1 percent.
Meanwhile, sales have surged for luxury brands such as Mercedes-Benz -- which, like Audi and BMW, has introduced stretched models to cater to wealthy Chinese consumers' taste for big sedans. Mercedes-Benz sales in China surged 67 percent in February.