China ends subsidies for rural vehicle sales

Article by Christian A., on January 5, 2011

The Chinese government’s subsidies for vehicles sales in rural areas are over, as of Jan. 1, according to the Ministry of Finance. These incentives include those for small cars and trucks. This marks the end of a policy that began in March 2009 to boost automobile demand when the global recession was at its worst point.

Days before this announcement, the government also called for a halt in incentives for buyers of small vehicles. China also announced that the subsidies to buyers of fuel-efficient cars have been extended.

Analysts said that these changes will affect major mini-vehicle makers, such as Chongqing Changan Automobile Co Ltd and GM-SAIC-Wuling, since minivans and pickup trucks are popular in rural areas.

The analysts also think that many domestic and foreign players, such as GM, Changan and Ford Motor Co., will still benefit from Beijing's handouts for fuel-saving models.

GM-SAIC-Wuling is General Motors Co.'s three-way venture with SAIC Motor Corp Ltd. and Wuling Auto in southern China. On Dec. 28, the government said that it will raise the sales tax on vehicles with engines of 1.6 liters or smaller to 10% from its current 7.5%.

Last year, the tax was at 5%. China's total vehicle sales rose by 46%. Contributing to the sales improvement are the various government policies, which include a consumption-tax rebate, subsidies for rural car buyers and incentives of up to 18,000 yuan to trade in older models. [via autonews - sub. required]

Topics: china, sales, incentives

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