China plans to continue auto sales tax cuts in 2010

Shanghai, December 1 (Gasgoo.com) China plans to continue the auto sales tax cuts next year and the tax incentives will be expanded to more vehicle models to further support the country's auto industry, the Shanghai Securities News said over the weekend.

China's Ministry of Finance and top economic planner, the National Development and Reform Commission (NDRC), have both approved of carrying on with sales tax cuts on passenger cars in 2010, a policy which has boosted auto sales in the Chinese market to record monthly highs this year, the newspaper said.

In late January, China began to halve sales tax to 5% for cars with a 1.6 liter engine or smaller, and said this stimulus measure was to expire by the end of this year. Now as the government plans to continue the successful incentives, the tax cuts will apply to all passenger cars, with sales tax on smaller cars to be cut more.

This year amid the global industry downturn, China's auto market has stood out thanks to government policy incentives, which also include subsidies for buyers in rural areas who traded in old vehicles for new and more fuel efficient ones. The "old-for-new car" scheme will also continue in 2010.

In the first ten months, China's auto sales grew 37.8% year on year to 10.89 million units, hitting the 10-million-unit mark for the first time ever. Sales in October rose 72.5% from a year earlier to 1.22 million units, with sales of passenger cars up 75.8% to 946,400.

Auto industry executives said that China's vehicle sales in 2010 may slow from roughly 40% growth this year due to a much higher comparative base, but will continue to expand at a fairly rapid pace.