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China announces "limited" measures to reverse falling car demand

By just-auto.com editorial team | 7 June 2019

The Chinese government announced new measures designed to stimulate domestic consumption of durable goods, including car purchases, according to Bloomberg.

The country's vehicle market declined sharply in the first four months of the year, by over 12% to 8,353,500 units compared with 9,501,000 units in the same period of last year, as consumer and business confidence continued to weaken as a result of the trade war with the US and growing economic uncertainty.

Many domestic vehicle manufacturers are currently operating at around 50% capacity, while dealer inventories have continued to build up.

The policies announced on Thursday encourage local governments to provide additional "support" for the vehicle market, rather than offer any direct new spending measures by the central government. 

According to Bloomberg, citing a statement on the National Development and Reform Commission's website, local governments will be banned from placing restrictions on new car purchases and from limiting the use of new energy vehicles. 

The measures are less generous than had been expected following an earlier leaked draft and may not be enough to reverse the current slowdown.

Following the implementation of tax cuts earlier this year, including a cut in the VAT rate from 16% to 13% and in the social security rate from 20% to 16%, the central government is constrained in how much more direct stimulus it can offer.

The state-backed China Association of Automobile Manufacturers had earlier called on local authorities in some cities to relax previously introduced restrictions on the issue of new licence plates and for levies paid by vehicle buyers in rural areas to be lowered.