Auto industry hoping for tax cut extension
- Source: Global Times
- [09:05 September 09 2009]
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By Chen Xiaomin
Even though auto sales surged to 1.14 million units in August, carmakers are worried about a possible slip if government-enacted stimulus measures and favorable policies are scaled back.
Figures from the China Association of Automobile Manufacturers (CAAM) show nationwide auto sales up 4.71 percent from July and 81.68 percent from 629,000 unit last August, the lowest in 2008.
This is the sixth month in a row when the country's auto sales have topped 1.1 million. And a total of 8.33 million cars, up 29.18 percent year-on-year, have been sold from January to August.
Dong Yang, CAAM's executive deputy director, attributed the booming market to Beijing's stimulus measures, especially sales tax cuts, and strongly recommended the government maintain these favorable measures to keep sales rising.
Growth in car sales slowed to single-digits in 2008 as a weak economy dented automobile demand. The market began to recover in February this year reversing January's negative 14.35 percent growth thanks to the government's policy support.
The government halved sales tax for 1.6-liter and below cars in February. The policy will expire in December. Sales of the cars increased 55.5 percent in the first eight months, 18.7 percentage points higher than the growth rate of passenger cars.
Sales of low emission cars accounted for 70 percent of total passenger car sales during the same period, up 9 percentage points.
A 10 percent sales tax is levied on all other cars.
"I recommend differential taxes levied in accordance with emissions–less on low emission car and higher on high emission ones," said Dong.
Other industry insiders also expressed their hopes for continuance of the policy.
Zhang Xiaoyu, director of the Society of Automotive Engineers of China, told a group of reporters at the 2009 International Forum on China's Auto Industry Development over the weekend that he hoped the policy could last for three years.
Xu Changming, an official with the State Information Center, said at the forum, it would be better if the government continue the policy until the economy recovers considering the auto industry's significant contribution to GDP growth in the first half of the year.
CAAM's Dong projected 11 million auto sales for the whole year, adding 10 million would be sold till October.
Dong also refuted the idea of overcapacity in the industry, saying output that is 30 to 35 percent higher is normal for a market with a 20 percent annual growth rate.
