End of tax break a minor issue for busy auto sector
- Source: Global Times
- [08:07 December 08 2010]
- Comments
By Chen Xiaomin
The impact on China's auto market from the likely cancellation of a tax break on small vehicles will be minimal next year, an industry association official said Tuesday.
"The impact won't be huge since China's auto market has returned to pre-crisis levels," Du Fangci, assistant secretary-general of the China Association of Auto Manufacturers (CAAM), told the Global Times Tuesday.
Currently auto buyers pay a purchase tax of 7.5 percent on vehicles with an engine displacement under 1.6 liters. That number may rise to 10 percent after the incentive program expires January 1, 2011.
Beijing cut the tax to 5 percent in 2009 and raised it to 7.5 percent for small vehicles this year. CAAM said in a report from late last year the move helped rev up 2009 auto sales, which climbed 46 percent to 1.36 million units.
A fax request to the National Development and Reform Commission for comment went unanswered, although local media quoted an anonymous official from the commission as saying Beijing won't extend tax incentives for small cars next year.
The auto market will enjoy a 25 percent sales increase to 17 million units, Du said.
Jin Yibo, spokesman of Anhui-based Chery Automobile Co, doesn't expect the purchase tax cut to be extended, while he also doesn't believe the scaling-back of incentives would drag down Chery's sales next year either.
Jin told the Global Times that although the purchase tax for small vehicles was raised this year, Chery, a producer of mostly small vehicles, still couldn't keep up with market demand.
"What we worry about is how to produce more autos," said Jin. The lack of tax incentives won't slow auto sales, he said.
Subsidies for buyers in rural areas and those that trade in vehicles in China's "cash-for-clunkers" program will also expire at the end of the year.
Liu Lixi, an auto analyst with Northeast Securities Co, said in a report that any negative effect from the absence of government incentives will be short-lived.
