Sales tax hike not expected to dent 2010 auto sales

A salesperson shows the Chang'An BenBen at a Beijing auto expo in November. Photo: CFP

By Wu Ye

China's decision to partially roll back a tax break for small car purchases in 2010 may push the already hot auto market to a higher level at the end of 2009, and will have little impact on sales next year, said analysts and auto companies.

The 2010 sales tax on small cars with engines up to 1.6 liters will go from 5 percent to 7.5 percent.

The hike was announced following an executive meeting of the State Council chaired by Premier Wen Jiabao last Wednesday, a day after cars and truck sales in China hit 1.01 million in November.

The figure is up 104 percent from the same month last year.

Overall auto sales stood at 12.23 million in the January- November period, up 42.39 percent year on year, according to data released by the Shanghai-based China Passenger Car Association (CPCA), a private research group.

In January China cut the sales tax on small cars in half from 10 percent as part of a stimulus package to boost domestic demand amid the global financial crisis.

The reduction will help auto sales exceed 13 million units this year, said the China Association of Automobile Manufacturers (CAAM).

Small autos have contributed to 85 percent of the sales in the domestic market, CAAM reported.