China Cuts Sales Tax For Small Cars As Economy Slows

The Chinese central government has announced that it will cut sales tax for light vehicles with an engine capacity of 1.6-litres or less by half, to five percent in an effort to boost private consumption.

Passenger car sales have been down for three consecutive months since July. Year-on-year, sales fell 3.4 percent in June, 6.6 percent in July and 3.4 percent in August.

Some are also expecting China’s total industry volume, which totalled 21.98 million vehicles sold in 2014, to fall for the first time in ten years.

Earlier this month, the China Association of Automobile Manufacturers have been lobbying the Chinese government to introduce stimulus measures to boost the car market.

The cut in sales tax will take effect today 1-October 2015.

China frequently adjusts sales tax to boost/cool the car market. In 2009, when the global financial crisis was at its peak, China reduced its sales tax for light vehicles (1.6-litres or less) to five percent, before raising it to 7.5 percent in 2010 and subsequently restoring it to 10 percent in 2011.