Auto sales back on track

The vehicles are assembled at a Kama Automobile Co plant in Ganzhou, Jiangxi province. [Photo by HU JIANGTAO/FOR CHINA DAILY]

Tax cuts and other incentives lure potential buyers to showrooms

China’s auto market was hit hard in April, with sales falling nearly 50% year-on-year to 1.2 million units due to factory shutdowns and a significant reduction in trade in the exhibition halls caused by the outbreaks of COVID-19.

The sharp fall raised fears that the world’s biggest auto market since 2009 could contract this year, but that sentiment was dispelled by an upbeat outlook for production and purchasing after the worst April in a decade for the ‘industry.

More than 1.86 million vehicles were sold last month, according to the China Association of Automobile Manufacturers, down 12.6% from the same month last year but up 57.6% from compared to the April figure.

The association’s statistics were provided by domestic and international automakers operating in China, which are ramping up production and whose dealerships are beginning to see an influx of visitors to showrooms as COVID-19 outbreaks loom. mastered.

Analysts at Soochow Securities expect the upward trend in production and sales to accelerate in the coming months.

“The growth rate will average more than 20% year-over-year from June to year-end,” the analysts predicted in a research note.

Their estimate is based on efforts to bring COVID-19 under control and, more importantly, the series of measures introduced by governments, including the halving of purchase tax on vehicles, the issuance of license plates additional registration and campaign “in the countryside” for new energy vehicles.

On June 1, the purchase tax, which used to be 10% of a vehicle’s retail price, was reduced to 5% for cars costing up to 300,000 yuan ($45,000) and equipped engines of 2 liters or less, according to the Ministry of Finance. The tax reduction is in effect until the end of this year.

Wang Chen, a 30-year-old information technology engineer in Tianjin, said the tax cut made him think hard about buying a Volkswagen Lavida.

“To be frank, I can buy the vehicle now or later because I don’t need it urgently, but the tax reduction can save me about 7,000 yuan, which is almost my monthly salary.” , Wang said.

According to a plan announced last month by the State Council, China’s cabinet, nationwide vehicle purchase tax cuts will total 60 billion yuan by the end of this year.

According to an estimate by Ping An Securities, the tax cuts will amount to 17 percent of vehicle purchase taxes levied last year.

In 2009 and 2015, China introduced measures to halve the purchase tax on passenger vehicles with engines up to 1.6 liters. On both occasions, the tax cuts revived the car market.

This year, more vehicles are subject to the reductions. According to data from Huafu Securities, more than 90% of gasoline car models are eligible for the tax reduction, up from around 65% in previous years. This means that the most popular brands, including Volkswagen, Toyota, Geely and Great Wall Motors, benefit from the favorable tax policy.

Cui Dongshu, general secretary of the China Passenger Car Association, described the tax cut as “a super big bonus” for the auto industry.

In April, the association estimated that nationwide passenger vehicle sales would struggle to reach 19 million this year. “With the new policy, we now expect retail sales to reach 21 million this year, up 4% from 2021,” Cui said.

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