China to continue green-car subsidies over coming year

Taipei Times, January 1, 2011

China said it will continue to offer subsidies for energy-efficient cars this year. The move will help the world’s largest auto market as other factors threaten to slow its rapid growth.

The Chinese Ministry of Finance said in an online notice that the subsidies for fuel-efficient vehicles and new energy vehicles will be extended through the year to help cut emissions. The notice did not provide further details.

Vehicle sales in China hit a record high last year and are expected to keep rising this year, but at a slower rate.

The Chinese government will end subsidies for vehicle sales in rural areas starting today, three days after announcing a halt in incentives for buyers of small vehicles.

The incentives being stopped in rural areas include those for small cars and trucks, the Ministry of Finance said in a statement yesterday. That ends a policy started in March 2009 to foster automobile demand at the height of the global recession.

The government said on Tuesday that it will raise the sales tax on vehicles with engines of 1.6 liters or smaller to 10 percent from its current 7.5 percent. The tax was 5 percent in 2009.

Policies including a consumption-tax rebate, subsidies for rural car buyers and incentives of up to 18,000 yuan (US$2,731) to trade in older models helped China’s total vehicle sales jump 46 percent last year, helping the country overtake the US to become the world’s biggest automobile market.

China’s vehicle sales may reach 20 million units this year according to Bill Russo, a Beijing-based senior adviser at Booz & Co.

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