Sales tax hike not expected to dent 2010 auto sales

Rushing to buy

"The increased costs in 2010 due to the new tax will push consumers to purchase autos before it takes effect on January 1, which may add heat to current auto market," Yu Te, an analyst of Dongxing Securities, said in an interview with the Global Times.

Yu said he believes that overall auto sales in 2009 will top 13.4 million units.

Buying a car for 100,000 yuan ($14,645) before January 1 will save the consumer 2,316 yuan ($339), Yu said.

"Visitors to our showroom are increasing every weekend," said a sales agent at a Chery 4S dealership last Saturday at Beijing's Asian Games Village Auto Trade Market, where 80 percent of the cars qualify for the tax break.

Lin Xuemei and her husband Zhao Jin bought a red C-Quatre with an engine capacity of 1.6 liters last Saturday.

"We think it's better for us to buy the car as early as possible because the inventory is very few and we're afraid of missing out on the tax incentive policy," said Lin.

Liu Bo, a sales manager of Dongfeng Citroen's dealership, said that many of their customers stopped stalling and began buying after the new policy was announced.

"Several brands have sold out," said Liu.

However, Zhong Shi, an independent auto analyst based in Shanghai, said it wouldn't be necessary to rush to buy before the end of 2009 due to discounts that dealers are expected to make that could offset the tax hike.

Driving greener

According to analyst Zhong, the focus of the government stimulus policy has shifted from boosting market sales to environmental protection because the government decided to raise the subsidy for trade-in cars from between 3,000 and 6,000 yuan ($440 to $880) to between 5,000 and 18,000 yuan ($730to $2,635) per vehicle in five trial cities and to subsidize seven more cities for the use of energy-efficient and new-energy vehicles.

"Auto producers and dealers need to sense the change and make appropriate development strategies according to the guidelines next year," remarked Zhong.

In an online survey conducted by Sina, about 70 percent of 22,341 respondents believed that the sales tax hike will affect their purchase decision and 61 percent anticipated it will greatly reduce the growth rate of auto sales next year.

However, analyst Zhong believed that the small adjustments of the new stimulus package will not change its overall strength because the higher subsidy for trade-in cars will balance out the sales tax hike.

He added that he believes the demand for autos will remain high because consumers' confidence was boosted by the economic recovery in 2009.

Shang Yugui, a spokesman for Hebei-based Great Wall Automobile Company, struck a similar note. "Cars have become daily necessities nowadays, and the growth rate for auto sales next year will reach at least 25 percent with sustained high economic growth."