Lack of consumer confidence and the Chinese New Year holiday will send China's auto sales down in January, an industry association said.

Chinese consumers' demand for cars will fall in January, with much demand released early in December and a lack of consumer confidence during the economic downturn, an industry association said.

China's policy of halving purchase taxes on internal combustion engine vehicles ended at the end of December, which overdrew demand for cars in January, the China Automobile Dealers Association (CADA) said in a report on Tuesday.

In addition, China's economy is under downward pressure, consumer confidence is low, consumers have less purchasing power and are still cautious about buying big-ticket items, all of which will have a large negative impact on the auto market in January, the CADA said.

In the report yesterday, the CADA released its December China Auto Consumption Index at 60.9, a rare and significant drop from November's 97.3.

The index's demand sub-index came in at 63.1 in December, down from 90.6 in November, the CADA said, adding that demand for car purchases is expected to decline in January 2023.

The end of China's three-year-long Covid control in December and the ensuing widespread infection could see a peak in January 2023, according to the CADA report.

This left year-end traffic for car purchases not meeting expectations, and January traffic struggled to stay at high levels, the CADA said.

Moreover, with the Chinese New Year holiday in January, factors including consumers returning hometowns for the holidays will further impact traffic growth, the CADA noted.

China's upcoming Chinese New Year holiday is from January 21 to 27, and with the lifting of Covid controls, the world's largest migration of people is expected to occur again.

In 2022, Chinese auto dealers face Covid epidemic controls for much of the year, and operations are greatly impacted.

The latest survey showed that about 90 percent of dealers did not meet their full-year sales targets, and nearly half are in the red, the CADA said.

For 2023, most dealers are optimistic about auto sales.

More than 60 percent of dealers believe China's auto sales will grow to vary degrees in 2023, and nearly 30 percent believe sales will be the same as last year, with very few believing sales will decline, according to the CADA.

But dealers also believe the Covid outbreak will be at its peak in the first quarter, and with the Chinese New Year holiday in January, boosting auto sales will be challenging, the CADA said.