China: Lowered tax for small engines should stay, automakers say

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Automakers have been benefiting from the tax cut for smaller engines in China and they now want the government to make it permanent.

As the biggest auto market in the world started to show signs of slowdown during last year, authorities decided in October to spur the demand by lowering the purchase tax for new cars from 10 to 5 percent for the vehicles fitted with engines up to 1.6-litre until the end of 2016. The strategy has proved a good one, as passenger-vehicle sales rose in seven of eight months since the levy has been lowered. As an example, following a 6.4 percent increase in April, new-car sales jumped even further – with a double-digit rate last month, when 1.76 million units were delivered. China’s Association of Automobile Manufacturers now asks from the government for the tax to stay indefinitely at the current level, Bloomberg reports. “It’s very necessary to have the policy in place on a long-term basis,” Ye Shengji, the association’s deputy secretary general, said this week.

Around two thirds of all the new passenger cars sold in China last year were powered by engines smaller than 1.6 liters, while all of the ten best-selling models this year have such small units. Such a push seems somehow contradictory, as authorities are fighting with dangerous emissions levels and with some highly congested traffic in the country’s largest cities. Beijing aims to lower its traffic by imposing several restrictive measures such as car license plates lottery, banning some cars on specific days or implementing congestion-based charges.

Via Bloomberg