China’s automobile market suffers from policy vacuum new energy subsidies

Give the sun a glorious glow. This is to say that China's auto market - the financial crisis to the global auto market into crisis, the Chinese auto market but because of little policy support and jumped to the goal, to achieve a major breakthrough.

However, at the end of last year, the vehicle purchase tax incentive policy lasting two years came to an end. At the same time, the subsidy policy for cars to the countryside and trade-in subsidies will cease to be implemented after the end of last year. In particular, the end of the implementation of the two-year purchase tax preferential policy, let the Chinese auto market suddenly become lonely.

In 2010, China imposed a vehicle purchase tax on the 1.6-liter and lower-displacement passenger cars at a reduced rate of 7.5%. Prior to this, the preferential taxation policy for purchase tax was levied at a 5% rate. During the implementation of the vehicle purchase tax concession period, China's small-displacement vehicles with a capacity of less than 1.6L have grown rapidly, and China has become the world’s largest consumer of automobiles.

With the end of a series of auto market policies such as purchase tax concessions, trade-in replacements, and autos going to the countryside, this year's automobile market has seen a period of policy vacuum. So, in 2011, in the absence of purchase tax concessions, are we to cherish memories or continue to look for a new driving force in the auto market?

Purchase tax 10% to 5%, 7.5% to 10%

As a Chinese citizen, it is undoubtedly an exciting thing to be able to enjoy preferential taxation, and vehicle purchase tax brings a lot of joy to the people in the two years from 2009 to 2010.

From the initial 10% to 5% of the “half-price” promotion, and to 7.5% after the price increase, even though a car with a price of about 100,000 yuan is worth more than 2,000 yuan in taxes, it still gives rise to the entire automobile market. Crazy. Therefore, when the purchase tax returned to 10% two years ago, we can imagine the reluctance of the people.

People who are concerned about the Chinese automobile market know that China's preferential tax policy for vehicle purchases began in January 2009. In the following two years, it was precisely because of its contribution that the Chinese auto market surpassed the United States to become the world’s number one.

I believe we all remember that in 2008, the global financial crisis forced the US auto giants GM, Ford, and Chrysler to face precarious conditions. They also fell out of bankruptcy and reorganization, and the global auto market generally experienced a sharp decline.

At that time, in response to the risk of financial crisis and boosting the auto market, the "Auto Industry Promotion Plan" led by the State Council and implemented jointly by various ministries and commissions was introduced and implemented in January 2009. The important content of this plan is to stimulate automobile consumption, including halving the purchase tax of passenger vehicles with 1.6 liters and below of the displacement by 5%.

For a pessimistic automobile market, the "Industrial Revitalization Plan" is like a shotgun. In 2009, China's auto sales reached 13.64 million, an increase of 46% year-on-year, and China became the world’s largest automotive market over the United States. In 2010, after the purchase tax rate for passenger cars with a displacement of 1.6 liters or less was adjusted upwards to 7.5%, the auto market maintained a high growth rate.

At the end of last year, a message made the auto market "fueled by the flames," and it exploded at the end of the year. Departments of the Ministry of Finance and other agencies have issued news that the approval of the State Council to impose a vehicle purchase tax on the 1.6-liter or lower passenger car at a reduced tax rate of 7.5% ceased after the expiry of December 31, 2010. From January 1, 2011, vehicle purchase tax will be levied uniformly at a tax rate of 10%.

Well, now, once again returning to 10% of the purchase tax, so that the past concessions have become history, the Chinese auto market lost its policy support. In 2011, in the days when there were no purchase tax concessions, what policies could make us look forward to?

Energy-saving Huimin sings the protagonist on the basis of the expiration of the purchase tax preferential policy for 1.6L and below displacement cars, so that “energy-saving products Huimin Project” energy-saving cars become the main policy of the auto market in 2011.

From the end of June last year to the beginning of December last year, the Ministry of Industry and Information Technology released a promotion catalogue of four batches of “Energy-saving Products Huimin Project” (1.6L and below passenger cars). Consumers can enjoy a subsidy of RMB 3,000 when purchasing models in the list. The pulling action of energy-saving projects can be described as immediate, and from the moment they are released, they “heat up” the small-car market. After the expiry of the purchase tax preferential policy, the “Energy-saving Products Benefiting People Project” will play an important role in the automobile market.

Some experts predict that the total amount of subsidy for “energy-saving products benefiting people's projects” in the second half of 2010 will be about 3 billion yuan, and the sales of benefit vehicles will be about 1 million. In 2011, there is no doubt that the energy-saving and environmentally-friendly models will take over the guns for purchase tax incentives, and continue to play a leading role in the year of the rabbit.

For ordinary people, although the number of 3,000 yuan energy saving subsidies is not very large, vehicles marked with energy-saving labels will undoubtedly be more popular. After all, the moneybags of ordinary people cannot catch up with the speed of rising oil prices. In that case, why not choose an energy-saving model?

The new tax policy on transport and transportation still holds the view that most of the auto market expectations in 2011 also included a new travel tax policy. Although everyone expressed dissatisfaction with the tax increase on the draft 1.6L to 2.0L models, if the relevant departments can listen to the voice of the people and make adjustments to the new draft, I believe it will still point the way for the Chinese auto market in 2011.

As a taxation period, the taxation of vehicles and boats can play a role whether it is for the consumers' car or the new car. If the new version of the ship tax can firmly implement the energy-saving emission reduction ideas, then its implementation in 2011 will surely have a clear direction on the new car sales, but also leave a buffer period for the adjustment of the automobile industry.

On October 28 last year, the relevant authorities announced the "Draft Law on Vehicle and Vessel Tax (Consultation Draft)". In the draft, the tax burden on passenger vehicles (cars with less than 9 passengers), which account for about 72% of the total car fleet, has been reduced, unchanged, and improved structurally in accordance with the size of engine exhaust. For small-displacement vehicles with displacements of about 1.6 percent and less than 1.6 liters of existing passenger vehicles, the tax amount will be reduced or remain unchanged. For medium-displacement vehicles with a displacement of approximately 1.6 percent to 2.5 liters, which accounts for approximately 39% of the total number of existing passenger vehicles, it is appropriate to increase the current tax range from 360 yuan to 660 yuan per annum. For large and large-displacement vehicles with a displacement of 2.5 liters or more, which accounts for about 3% of the total number of existing passenger vehicles, the current tax range from 360 to 660 yuan per year has greatly increased. The new draft provides for tax exemption for vehicles and boats using new energy.

For the new draft, many people report that passenger cars with a displacement less than 2.0 are the main models owned by urban ordinary consumers. It is not appropriate for the draft to increase the taxes on such vehicles. However, consumers of passenger cars with a displacement of 3.0 or more generally feel that the tax burden is too light, and it is recommended that they be further aggravated. However, for the tax adjustment of vehicles and boats, the current tax payment for vehicles and vessels in most cities is still levied according to the original standard in 2011.

New Energy Vehicle Subsidy In addition to the 1.6L or less displacement passenger car energy-saving list, the generous subsidy policy for new energy vehicles is expected to change in the auto market in 2011.

As the relevant government agencies have been relatively supportive of energy conservation and emission reduction, the scale of support for new energy vehicles has been the largest in the world. Given the appetite for new energy vehicles, if these subsidies can continue to intensify, perhaps China’s new energy vehicles will achieve a substantial leap forward in 2011.

On June 1 last year, the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, and the National Development and Reform Commission jointly issued the "Notice on Launching Subsidies for Private Purchases of New Energy Vehicles," and delineated the opening of five cities including Shanghai, Changchun, Shenzhen, Hangzhou, and Hefei. Purchasing new energy vehicle subsidies for pilot work will provide a subsidy of 3,000 yuan to 60,000 yuan for new energy vehicles that meet the conditions.

Subsequently, local governments in cities such as Shenzhen, Hangzhou, Shanghai, and Beijing also successively introduced richer new energy vehicle subsidies. It can be predicted that with the expiry of the purchase tax preferential policy, the subsidies for new energy vehicles will probably play the strongest voice in the 2011 auto market.

Glossary Vehicle purchase tax Vehicle purchase tax is a tax imposed on units and individuals that purchase the required vehicles in China. It is derived from the vehicle purchase surcharge. The basic norms of the current vehicle purchase tax law are the "Provisional Regulations on Vehicle Purchase Tax of the People's Republic of China" which was implemented on January 1, 2001. Taxpayers of vehicle purchase tax are units and individuals of taxable vehicles purchased (including purchases, imports, self-produced, donated, awarded or otherwise obtained and used by themselves), and the scope of taxation is automobiles, motorcycles, trams, trailers, agricultural use. For a transport vehicle, the tax rate is 10%, and the calculation formula for tax payable is: purchase additional tax = car purchase/(1+17%) x purchase tax rate.