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Beijing mulling tax cut to support auto sector

By Dave Leggett | 29 October 2018

A Chinese regulator is reportedly planning to propose a big cut in car purchase tax to support the Chinese auto sector, which is facing lower sales and intensified competition. China's auto industry is also having to deal with the adverse consequences of an ongoing trade war with the US, which is impacting consumer confidence.

The world's largest car market is facing its first decline in decades and the prospect of a slowdown is hitting confidence across the supply chain.

Bloomberg reports that China's top economic planning body - the National Development and Reform Commission - is proposing to halve the tax on car purchase to 5% (from 10%). The report said the measure would apply to cars with engines no bigger than 1.6 litres, said the report.

The latest report follows earlier suggestions that Beijing could be open to taking action to support the automotive sector. Tax cuts have been used before to stimulate demand.

New vehicle sales in China fell by 11.6% to 2.39 million units in September from strong year-earlier sales of 2.71 million units, according to data gathered by the China Association of Automobile Manufacturers (CAAM). It was the third consecutive monthly decline.