China's auto prices up in September on sales tax

China's automobile prices rose in September buoyed by an increased consumption tax that was aimed at curbing sales of high emission cars to save energy.

Prices of domestically-made vehicles edged up 0.74 percent from August, a rise of 0.59 percent from a year earlier after consumption tax increases of up to 20 percent took effect on Sept.1, according to the price monitoring center of the National Development and Reform Commission (NDRC) on Thursday.

Prices of the sports cars rose a notable 1.14 percent from a month ago and 1.27 percent year on year, as the consumption tax on vehicles with engine capacities above 3 liters was lifted by 10 to20 percent.

The costs of the vehicles with lower emissions remained unchanged from that of August.

Multi Purpose Vehicle (MPV) prices were up 1.11 percent from July and 1.92 percent from a year earlier. Sedan car prices have increased for five consecutive months as engine upgrading drove up production costs significantly.

Imported high-emission cars saw price rises of 6.21 percent from August, and 7.51 percent from the year earlier, mainly due the consumption tax rise.

The Ministry of Finance decided to raise the consumption tax on automobiles with engine capacities of 3.0-4.0 liters from 15 to 25percent, and that of vehicles with engine capacities above 4.0 liters were lifted from 20 to 40 percent. The tax on automobiles with engine capacities below 1.0 liter were reduced from 3 to 1 percent. The move aimed to encourage the sales of energy-efficient cars amid the skyrocketing oil prices.

Insiders said prices were expected to slump at the end of the year as the auto sellers would use discounts to attract consumers to reach their yearly sales targets.

Jia Xinguang, a well-known auto industry analyst said the tax rate adjustment would not have a fundamental impact on domestic auto sales since the tax rate on vehicles with engine capacities of 1 to 2.2 liters that took half of the total sales remained unchanged. Sales of vehicles with engine capacities of 3 to 4 liters comprised only 0.26 percent of the total.