The Chinese government will end the rebate on car purchases by Dec. 31 – a move that is expected to benefit overseas automakers including GM, Ford Motor Co. and Nissan Motor Co., according to Bill Russo, a Beijing-based senior adviser at Booz & Co.
This subsidy, which reduces the tax from 10% of the purchase price to 7.5%, covers cars with engines of 1.6 liters or smaller, a segment dominated by Chinese models. Many consumers are now waiting for 2011 to buy a vehicle instead of beating the Dec. 31 deadline for the consumption-tax rebate.
One model that is expected to be popular is the upcoming Baojun 630 sedan from SAIC-GM-Wuling Automotive Co. The China Association of Automobile Manufacturers said that local brands made up about 63% of the new models with that size engine last year.
Russo explained that incentives are being used to keep customers as well as to appeal to first-time buyers. He believes that as subsidies are phased out, it will pose as more of a challenge for local companies than for foreign carmakers.
“The game that has been played with incentives is to try to keep consumers, especially first-time consumers, interested in purchasing those locally branded cars,” Russo said. “To phase out the subsidies is more challenging for local companies than for foreign ones.” [via autonews - sub. required]