China auto industry cuts 2022 vehicle sales outlook: Know why

China's auto industry forecasts that its vehicle sales in 2022 will grow by a modest three per cent instead of the previous projection of 5.4 per cent. This slump in growth projection comes as the Covid-19-related restrictions have dented sales and consumer sentiment in the country. China's automobile industry association CAAM on Monday downgraded the sales forecast and blamed it on the slump in commercial vehicle demand, reports Asia Nikkei.

The association claimed that China's auto industry will sell 27 million cars this year, up three per cent as compared to 2021. Previously, the CAAM projected the growth to be 5.4 per cent in December last year at 27.5 million vehicles. In the latest forecast, the association said that it expects a 16 per cent fall in sales of commercial vehicles to four million units.

China's auto sector has been hit hard in recent months by the measures taken by its government to combat Covid-19. The government has at times put many parts of the country, including Shanghai, under stringent lockdown. This dented the demand and sales of vehicles. The authorities have tried incentives to revive demand, with the central government last month halving purchase tax to five per cent for cars priced at less than $45,000 and with engines no larger than 2.0 litres. However, the incentives didn't help much.

China's government has also taken many initiatives including introduction of policies aimed at encouraging sales of new-energy vehicles (NEVs). In May and June, some local governments began offering subsidies for trade-ins of petrol vehicles for electric cars. Some cities have also expanded quotas on car ownership. Such policies reportedly helped create an annual surge in sales seen in June, following four months that showed falls. The industry sold 2.5 million vehicles in June this year, up 23.8 per cent compared to a year earlier, the association said.