Chinese Automotive Stimulus to Continue into 2010

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2009 has been an impressive year for the Chinese car industry, it started off in turmoil with the January and February sales being at all time lows. The government stepped in and boosted the industry by cutting tax on small displacement cars which had the people heading en masse to the dealerships to pick up a subsidised car. Chinese car sales are expected to hit 13 million cars this year with every months sales for the past 6 being bumper records. China became the worlds largest car market this year, easily overtaking Japan and America to become the worlds biggest automobile consumer.

The previous tax for sub 1.6L cars was set at 5%, which was the catalyst for the explosion in car vehicle sales this year, this is set to be raised to 7.5% to slow down the market, whilst the government is planning to increase subsidies on car trade ins from between 3000rmb to 6000rmb, to an impressive 6000rmb to 18,000rmb. In 2008, car sales tax was set at 10% for sub 1.6L cars.

Sub 1.6L car sales accounted for 85% of the total number of sales this year, Overall auto sales reached 12.23 million units in the first 11 months of 2009, an increase of 42.39 percent over the same time frame in 2008.

2010 is likely to be another impressive year for the Chinese car industry with the government still promoting subsidies for rural buyers of mini vans and motorbikes. The government is hoping that the farmers will trade their heavily polluting tractors in for Mian Bao Che’s.