China's auto dealers' association has reportedly asked the government to halve taxes on car purchase to stimulate a soft market.

Reuters reported that the China Automobile Dealers Association (CADA) has submitted documents to the country's finance and commerce ministries proposing that the 10% auto purchase tax be halved.

Reuters cited sources at CADA and noted that the body has made proposals before that have been taken on board in Beijing.

The Reuters report also said that the commerce ministry has met with automakers this week to discuss the market and ways to spur growth, with cuts to purchase tax among the measures being considered.

The report added that the association is seeking a 50% cut to the purchase tax on cars with engines of 2L displacement or below. That is similar to a tax stimulus that helped boost the Chinese car market in 2016.

September data is not yet out, but Chinese auto sales fell 3.8% in August and 4% in July. September data is due out tomorrow amid rumours that a sizeable decline will be posted. Soft market conditions in China tend to quickly squeeze dealer margins unless the OEMs reduce wholesale prices (which they are reluctant to do), because the pressure is to discount to customers and maintain market share.

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