China automakers pin hopes on rural families

A "Cars to the Countryside" scheme will go into operation in China as of March 1, as part of a government-backed stimulus plan announced in January to fight the economic recession by stimulating domestic manufacturing. Detailed rules have been drafted and will be publicized soon.

Similar to the "Home Appliances to the Countryside" scheme, China's automakers are expecting to benefit from the project that aims to kick-start sales in rural areas of the country. Farmers can take advantage of additional rebates to buy cheaper vehicles.

In the scheme, the government will grant 5 billion yuan ($735 million) in subsidies to farmers who trade up to lightweight vans or purchase minibuses with engines size of 1.3 L or less.

Shen Yang, the general manager of SGMC, a joint venture based in Shanghai, lauded the move by saying that minibus, as a pragmatic vehicle for rural areas, can play an important role in lifting the auto market as a whole.

According to auto analysts, the project is expected to raise demand for vehicles by 1 to 1.5 million units, each of which will carry an estimated subsidy of 3-5,000 yuan.

In addition, in the stimulus plan, a tax cut will be offered for people who purchase smaller cars. Analysts estimate that farmers will benefit from the tax cut with a saving of about 5,000 yuan on each minibus.