China is rolling out policies to stimulate car sales as carmakers gradually rev up production which was affected by Covid-19 outbreaks. The government is planning to relieve car buyers of vehicle purchase taxes worth CNY60 billion. Analysts said it will prove to be a great boost to the pandemic-hit Chinese car market. Details, such as when it will be put in place and what vehicles will be covered, still need to be announced. The CNY60 billion relief would account for roughly 17% of vehicle purchase taxes levied in 2021, according to Ping An Securities. Carmakers, including Dongfeng Peugeot Citroen Automotive, said they welcome the policy but they hope the details are announced soon to counter customers’ wait-and-see attitude.
Cui Dongshu, Secretary General of the China Passenger Car Association, said the measure is likely to target gasoline-powered passenger vehicles. Electric cars and plug-in hybrids are now exempt from a purchase tax of 10%. He said the move will give “a strong impetus” to the passenger car market which saw an 11.9% drop year-on-year from January to April. In April, the drop was as much as 35.5% to 1.04 million units. Plant stoppages and dealership closures were all due to Covid-19 outbreaks. Almost all carmakers in China saw their production and sales fall last month year-on-year, which was the worst April in a decade. As plants are now resuming operations, the measure is expected to boost vehicle sales. China rolled out similar measures in 2009 and 2015, halving the purchase tax on passenger vehicles with engines no bigger than 1.6 liters. On both occasions it worked to invigorate the car market.
Lang Xuehong, Deputy Secretary General of the China Auto Dealers Association (CADA), said the measure should be put in place as soon as possible. “The CNY60 billion tax relief can be focused on purchases in the second half of the year. It could drive the growth rate of passenger vehicle sales this year up 10% from 2021,” said Lang. From January to April, retail sales of passenger vehicles totaled 5.96 million units, down 11.9% year-on-year, or 800,000 units less from the same period in 2021. Local governments in provinces including Shandong and Hubei have also released policies to stimulate vehicle sales, including subsidies and increasing the quota of license plates. Guangzhou, capital of Guangdong, is increasing its quota of license plates by 20,000, the China Daily reports.
