China’s carmakers shipped 16 percent more vehicles to dealers in January. But that was less than December’s 18 percent jump, when drivers bought before tax incentives for small cars expired at the end of the year.
Without those incentives, analysts said demand for smaller vehicles will decline this year and some manufacturers have already cut prices in what could be the start of a price war.
One company, BYD has already slashed prices of five of its models by up to one-fifth.
“Dealerships all across the country were crowded in December as people sought to take advantage of government incentives before the expiration. Many were actually paying the money upfront and waiting for months to get their cars,” said Boni Sa, an analyst with IHS Automotive.
“The Chinese Lunar New Year also bolstered demand for big-ticket items, but the following months could be challenging for automakers,” he added.
Many Chinese typically go on a buying spree ahead of the week-long Spring Festival holidays — which ran from Feb 2 to Feb 8 this year.