Shares of Continental AG, Volkswagen AG and PSA/Peugeot-Citroen dropped after the China Automobile Industry Association said at a recent briefing in Beijing that Chinese incentives for buying cars will not be extended and will likely expire at the end of December 2010.
Xiong Chuanlin, the vice secretary-general of the association says that, in 2009, the association wrote to the government requesting an extension for the tax incentives.
Preferred shares at Volkswagen, whose largest market is China, dropped as much as 7 percent, PSA declined by as much as 4.8 percent and Continental dropped as much as 6 percent.
In November 2010, deliveries in China surged 29 percent. But this trend is expected to change as stimulus measures in China, the world's biggest auto market, including subsidies for rural car-buyers, a consumption-tax rebate for smaller vehicles, and incentives to trade in older models are all due to expire at the end of the December 2010.
China is a growing market for Continental and PSA. Yu Bing, an automotive analyst at Pingan Securities Co. in Shanghai, said that consumers who expect the stimulus policies to be discontinued in 2011 are bringing forward purchases before time runs out. [via autonews - sub. required]