(Reuters) - Car sales in China may fall more than 10 percent this year after Beijing scrapped its policy incentives, a veteran industry observer said on Wednesday, marking the most pessimistic outlook forecast for the world's biggest auto market.
"It's normal to see a decline in the first year after the withdraw of government policy support. It would be abnormal if the market still grows," Rao Da, head of the semi-official China Passenger Car Association was quoted by China Business News as saying during a recent briefing.
"We must face up with the reality and accept a slower growth rate in the future," he said.
Beijing issued a massive package of stimulus measures at the height of the global financial crisis in 2009, including tax incentives for cars with engine sizes of 1.6 litres or smaller and rebates for farmers who traded in old vehicles for fuel-efficient models.
The incentives were scaled back in 2010 and scrapped at the beginning of this year.
The Beijing city government's recent move to impose quotas on new car registrations and possibly similar moves by other big cities to tackle traffic gridlock as well as further hikes in fuel prices will also apply the brakes on the market, Rao said.
As such, sales of small cars will decline this year, cutting back overall auto sales by 2 million units, he said, adding that demand for models little affected by the policy change, such as sports utility vehicles, will continue to grow moderately.
In 2010, auto sales in China increased by a third to a record high.
Many industry insiders, including Kevin Wale, head of General Motors' (GM.N) China operations, expect the market to return to a slower but more rational growth pattern this year after breakneck expansion since 2009.
