* Sales +26.1% in Sept yoy, +13.2% ytd
* 2016 forecast increased to 7 pct from 6 pct previously
* Tax-cut expiry could mean maximum 2% growth in 2017 (Adds association comments, context)
By Fang Cheng and Jake Spring
BEIJING, Oct 12 (Reuters) - Auto sales in China strengthened for a fifth consecutive month in September to a more than three-and-a-half year high, leading the national automakers association to increase its 2016 growth forecast, association officials said on Wednesday.
But the China Association of Automobile Manufacturers (CAAM) warned of a steep drop in growth if a tax cut on small engine cars is allowed to expire as planned at the end of this year.
The Chinese auto market, the world’s largest, has rebounded strongly since October last year when the central government cut the sales tax on vehicles with engines of 1.6 litres or smaller in response to slower sales in a weakening economy.
“If there isn’t this policy next year, growth will be extremely low,” association Vice-Secretary Shi Jianhua told reporters in Beijing.
Shi said he predicts the market will grow at most 2 percent in 2017, whereas if the policy is extended 6-7 percent growth will be “no problem.”
Vehicle sales in the world’s largest auto market rose 26.1 percent to 2.6 million vehicles in September from a year earlier, according to the association.
That is the highest monthly growth since January 2013, topping a 24.2 percent year-on-year rise in August and a 23 percent year-on-year increase in July.
Sales growth in 2016 has outstripped initial expectations, leading the association to upgrade its full-year forecast to 7 percent growth, from 6 percent previously.
Association officials repeated their hopes for the tax cut to be extended beyond its planned expiry at the end of the year.
“If the tax cut policy is not extended, this year there may be a rush to buy, it will subtract from next year’s sales,” Shi said.
In the first nine months of 2016, sales grew 13.2 percent compared with the same period in the previous year, the association said. (Reporting by Fang Cheng and Jake Spring; Additional reporting by Lusha Zhang; Editing by Stephen Coates and Muralikumar Anantharaman)