Rural auto subsidy unable to cover vast market

Shanghai, March 17 (Gasgoo.com) China has recently detailed its plan to earmark 5 billion yuan ($730 million) as subsidies for farmers' buying of light trucks and minivans, state media reported. But many carmakers, thinking these subsidies can't cover the vast rural market, have decided to subsidize rural purchases by themselves.

The "cars to the countryside" stimulus plan, announced earlier this year, was detailed by Finance Ministry statement last weekend. Under the plan, farmers who buy light trucks and minivans will get a 10% subsidy, up to a maximum of 5,000 yuan. Rural households can buy up to two motorcycles and qualify for a 13% subsidy of up to 650 yuan each.

"The 5 billion yuan subsidies are far from enough to cover the vast rural market and will play only a very limited role in boosting the vehicles sales in the countryside," said an auto industry expert who has taken part in drafting the subsidy plan. There is a huge market in China's rural areas, where over two-thirds of the country's 1.3 billion people live.

To explore this huge market, many Chinese automakers, some supported by local governments, have decided to subsidize rural purchases of their vehicles. Before a portion of the central government's 5 billion yuan subsidy trickles down, northeastern Jilin province has promised 100 million yuan as subsidies for farmers buying small vehicles made by a local FAW company.

"If the 5 billion yuan subsidy can be increased by 20%, the stimulus policy for the rural auto market will be more effective in boosting the demands and sales," said a Chinese-brand automaker.