Rural Chinese quickly becoming car owners

While automotive sales flounder in the U.S., rural China has seen an unprecedented explosion of car buying. This is largely due to some fairly radical government incentives to spur car buying and provide aid to the economy.

The measures include a 50% reduction of the sales tax, elimination of road maintenance fees, and an enormous 10% rebate for all rural residents purchasing vehicles with engines that are 1.3 liters or smaller.

Rural farmers are cashing in their life savings in order to take advantage of the deal. In the city of Chuzhou, 200 miles north of Shanghai, the per capita income is $1,700 per year. Farmers and other rural residents are purchasing vehicles like the Wuling Sunshine (a boxy micro-minivan) for between $5,000 and $7,500 in hopes of using the car to earn money by starting a delivery or taxi service.

The results in car sales have been drastic. For the first four months of the year, car sales rose in China by 9%, to 3.8 million vehicles, with record months in March and April. In comparison, U.S. sales fell 37% in the same four-month period.

The surge has its scary side, though. While you certainly cannot begrudge people for wanting to raise their standard of living, Chuzhou dealerships can't keep enough cars in stock to satisfy demand. Some of the rural areas mentioned include millions of people.

As more of the rural Chinese become car owners, the number of new drivers hitting the road represents a sizable environmental problem for China in terms of its already disastrous air quality, and for the world in terms of climate change.

Also, the increased demand for gasoline to run all those cars surely will not help the future of oil prices.