China to offer tax incentive on 'green' cars

The Chinese government will offer tax incentives for purchases of environmentally friendly vehicles such as hybrids and diesel-engine cars, the Japanese daily Nihon Keizai Shimbun said on Thursday.

The move, expected to be implemented this year, would lower prices for "green" vehicles by almost 10 percent, the newspaper said, without citing sources.

Chinese must pay a consumption tax of 17 percent on vehicles plus a purchase tax of 10 percent of the preconsumption-tax price, but the purchase tax would be waived for a government-compiled list of environmentally friendly vehicles, it said.

Buyers of a hybrid-engine version of Honda Motor Co's Civic, which sells for about 270,000 yuan ($39,350), would be exempt from the purchase tax of about 23,000 yuan, for savings of 8 to 9 percent, it said. The tax incentive would also apply to vehicles with diesel engines.

The move, which would follow a 17 to 18 percent hike in China's state-set gasoline and diesel prices last week, could help to spur demand for hybrids, which have been considered prohibitively expensive for typical Chinese car-buyers.

It could also boost sales of diesel-powered cars, a segment led by European automakers such as Germany's Daimler AG and France's PSA Peugeot Citroen. ($1=6.862 yuan)