China Sneaks In a Regular-Car Subsidy
Along with the pilot incentive program for all-electric cars and plug-in electric vehicles, China Tuesday announced it plans to roll out a nationwide program that provides 3,000 yuan ($440) a car in subsidies for consumers buying certain fuel-efficient versions of cars with 1.6-liter or smaller engines.
Last year, China successfully reversed plummeting sales in its auto sector with policy measures that included a purchase tax cut on smaller-engine vehicles. Those policies continued this year with some modifications: The purchase tax cut, for instance, was partially reinstated to 7.5%, though it’s still lower than the previous 10% level.
Tuesday’s move to offer consumer incentives to stimulate demand for those small cars, according to auto-industry executives, reflects Beijing’s fear of a slowdown in China’s rapidly growing auto market.
The industry executives believe the small-car purchase tax cut and other stimulus policies implemented since the global financial crisis of late 2008 have pulled ahead demand so much that there may be a fairly big deceleration of auto sales in store for later this year. Beijing shares the fear of that scenario, they said.
Already, in China’s mega auto markets, such as Beijing, Shanghai and Guangzhou, auto retailers are reporting that they are having an increasingly tough time selling cars. While consumers earlier paid premiums to get their hands on hot-selling cars, some of those dealers they are now offering discounts and other incentives in some cases to encourage consumers to buy cars.
Stimulus money of 3,000 yuan may not be enticing enough for people when buying a 50,000-yuan small car. But it effectively reinstates the tax cut Chinese consumers partially lost at the start of this year.
– Norihiko Shirouzu