China to halve purchase tax for cars with small engines

SHANGHAI: China’s purchase tax for cars with small engines will be halved, the Ministry of Finance said on Tuesday, in a move to boost car sales and support an economy plagued by closed downs imposed in large cities over COVID outbreaks 19 to vote.
The government will reduce the tax for cars that are not more than 300,000 yuan ($ 45,000) and with 2.0-liter or smaller engines will be priced at 5% of the sticker price, down below 10% earlier, it said in a statement .
The tax reduction will apply to purchases from June 1, 2022 until the end of the year.
The move came amid a series of measures that the Chinese cabinet unveiled on Tuesday to revive its economy, as its strict zero-COVID policy disrupted production and damaged demand in recent months.
The government said last week that it planned to relieve car buyers of purchase tax of 60 billion yuan after the largest car market in the world saw sales in April nearly 48% from a year earlier.
Nissan’s Sylphy, Volkswagen’s Lavida and Great Wall Motor’s Haval H6 are among the best-selling models in the category that benefit from the tax cut.
China’s car sales jumped more than 45% and surpassed the United States in 2009 when it first adopted a similar stimulus.
It is rumored that the tax reduction this year could increase car sales by two million units, said Cui Dongshu, general secretary of China Passenger Car Association.
However, it may mean that fewer electric cars are sold because the stimulus prevents pre-combustion vehicles, said Huang Yonghe, Chief Engineer at China Automotive Technology and Research Center.
China is also in talks with car manufacturers about extending costly subsidies for electric cars (EVs) that would expire in 2022 and reverse a planned increase in purchase tax for qualified EVs next year, Reuters reported earlier.
“The incentive policy will play a positive role in stimulating car sales in the short term,” Huang said. “But flooding the auto market with incentives will not create new demand, only bring purchases forward.”

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