The Chinese auto bail out: Lower taxes on sub 1.6l, and subsidies for sub 1.3l

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The Chinese government has been mulling over its own auto bail out for the past few months, and it seems they’ve finally come to a decision. Rather than throw money at big automakers, largely without getting a receipt, the Chinese government has decided that the best way to get people to buy cars again is buy lowering taxes.

The government is planning to lower taxes on all 1.6l and less displacement engines, which is essentially one of the best selling sized engines in China. Furthermore, consumers that opt to buy a 1.3l or less displacement engine will get government subsidises to encourage take up of super minis. From January 20th to December 31st 2009, Chinese consumers will be able to benefit from the lower taxes and subsidies.

According to media reports, the Chinese senate has realized that both the steel and automobile industry are major pillars of the Chinese economy, and wish to encourage their survival in tough times. The Chinese senate has therefore come up with a five point action plan to save the Chinese industry:

1. From Jan 20th to Dec 31st 2009 taxes will be lowered on sub 1.6l and subsidies available for buyers of sub 1.3l.
2. Reform of the automobile production industry, improving the conditions for spare parts production, and increasing production
3. Support domestic brands, and their acquasition and development of new technologies. A 100 billion RMB fund will be made available for this
4. Create a new energy resource fund – support the research, design, and development of electric cars, and electric car production in China. Also support the production of electric car parts.
5. Strongly support domestic brands – increase the production of spare parts, develop a modern car service industry, and perfect consumers financial credit.

Under the new rules, a consumer who buys a 100,000rmb car will be able to save 4724rmb on a new car purchase, which is not including any dealer discounts that might be available to consumers. The government hopes that the car industry will continue its epic growth into 2009, despite the stumblings of the market in late 2008, many analysts are still expecting good growth for the Chinese car industry, these measures will also give massive aid to a delicate market in 2009.