CHINA: Small displacement tax break ending

By just-auto.com editorial team | 7 December 2010

The Chinese government plans to end preferential taxes on small displacement cars.

A report on xxcb.cn, according to gasgoo.com, cited an official at the Industrial Coordination Division of the National Development and Reform Commission (NDRC) as saying the policy will expire at the end of December.

The NDRC had successfully implemented a series of policies and regulations since March 2009, which saw tax on small-displacement cars of 1.6 litres or below fall to 5%, and that was later adjusted to 7.5% for 2010 in a bid to slow down the market.

Consumers will pay at least CNY2,317 (US$348) more if buying a CNY100,000 car with an engine under 1.6 litre.

The secretary of the China Association of Automobile Manufacturers (CAAM), Zhang Boshun, was quoted by China Car Times as saying "With this year's taxes being lowered, there has not been a massive effect on small car sales. The taxes were originally lowered as a way to combat the global financial crisis, while now the Chinese auto market is growing much stronger and shows that the mission has been accomplished."

Separately, the Chinese government's "cash for clunkers" programme, providing subsidies ranging from CNY3,000 to CNY18,000 per person for replacing their old, polluting vehicles with new ones, will also last until 31 December.

There has been no official word about the programme being further extended.