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China Increases Taxes on Big Cars, Reduces Taxes on Small to Encourage Fuel Frugality

Xinhua. China’s Ministry of Finance has increased the tax on cars with engines with displacements larger than 2.0-liters from 8% up to a maximum of 20%, according to the Ministry of Finance. The new tax rates begin 1 April.

At the same time, the tax on cars with engine displacement between 1.0 and 1.5 liters will be cut from 5% to 3%. The changes are designed to discourage the purchase of gas guzzlers such as sport utility vehicles (SUVs) and large sedans, and to conserve oil in the energy-strapped nation.

On Tuesday, the ministry also announced that a consumption tax would be levied on oil products in a move to regulate and reduce energy usage.

China’s current Five-Year Plan (2006-10) puts great emphasis on energy conservation and sustainable development. Oil consumption by automobiles has been increasing rapidly as a result of rapidly-growing vehicle sales. China is now the world’s Number 3 vehicle market after the United States and Japan.

According to the State Council Development and Research Centre, a top think tank, automobiles are expected to devour 138 million tons of oil a year by 2010, accounting for 43% of the nation’s total consumption.

The proportion will jump to almost three-fifths by 2020, it said. In 2000, the figure was one-third. The research center predicted that China’s annual vehicle demand would reach 9.4 million units by 2010 and 18.9 million units by 2020, up from 5.7 million units last year.

Annual light-duty sales in the US range between 16 and 17 million units.

The new tax policy is expected to encourage people to buy economy cars. Analysts said the tax change would affect automakers’ product strategy.

For example, Tianjin FAW Xiali Automobile, an affiliate of China’s top vehicle maker First Automotive Works Corp, plans to launch nine new models within the next five years to be a leader in China’s economy car market. The company aims to double its sales to 400,000 vehicles by 2010 from last year.

Comments

odograph

I forget who said this first, but it keeps coming back to me ... "China is run by engineers, America is run by lawyers."

Of course you increase tax on large cars, etc. That's completely logical ... to an engineer. Unfortunately our lawyers think otherwise.

t

Starting from scratch, China had the opportunity to learn from our mistakes and not construct a new nation dependent upon the automobile. They blew it and no amount of taxes will solve the problem that they have created for themselves. Regardless of these actions, they still project massive increases in oil consumption.

They are building a whole new infrastructure here, devoted to a form of mobility that is absurd for a nation of a billion plus persons in an age of declining oil production.

The U.S., of course, is in no position to suggest a different path. We have already set the example, and have no intention of lessening our dependence.

Robert McLeod

Essentially a feebate in action.

Rafael Seidl

odograph -

before you equate the entire US legal profession a confederacy of dunces, consider the alternative to living in a messy democracy. My home town, Vienna, would have been on the wrong side of the Iron Curtain had the Western allies not been able to persuade the Soviets to pull out. China may be run by technocrats but it is still a dictatorship.

t -

If China has "blown it", then only because the Politburo is relying on breakneck economic growth to keep itself in power. Personal mobility is a prerequisite for that. Public transport is great for the environment but no emerging country has ever taken the drastic step of prohibiting personal car ownership altogether.

This particular tax will at least encourage carmakers to produce lighter, turbocharged engines, which are more efficient than naturally aspirated models. In addition, China should gradually move away from subsidizing and toward taxing automotive fuels:

http://peakoildebunked.blogspot.com/2005/10/120-gasoline-subsidies.html

Meanwhile, the Bush administration's proposal for improving fuel economy are very complex and downright counter-productive:

http://www.sierraclub.org/pressroom/releases/pr2003-12-22a.asp

odograph

I was thinking in more general terms about personality types, and their trajectories through US/Chinese societies.

Harvey D

Wouldn't be surprised if China moves away from OIL much faster than USA/Canada. They don't have to please the same OIL lobbies to get elected or stay in power. They could build PHEVs and EVs much quicker than we think. They are also investing much more than us in high speed electrified mass transport systems. We may soon have to look that way to find out how to do it. Amazing how fast the world is changing and economy/technology is shifting.

Andrey

Just to get things strait:
1. There is no viable option for cars. Mass transit is only a supplement.
2. There is no PHEV and EV vehicles on the road anywhere in the world. Why in China?
3. Turbocharged gasoline engine is even bigger nonsense than V8.
4. Japan, Europe, and Russia have vast and effective electrified train systems. Not gonna happened in US because:
5. US is run by lawyers, and they are using transportation, especially transit, as milking cow, and resulting overpricing kills it.
6. Japan has 10 times less lawyers per capita than US – it is considered a self disgrace in this country to sue.

Shaun

America used to be run by engineers too. We even had an engineer as a president once. Reading about him, it sounds like a made a pig's breakfast of things. Anyway, America isn't run by engineers anymore because Americans don't trust authority. We haven't since the 60s. Unpopular wars and dangerous technology endorsed by the federal gov't have a way of eroding confidence in authority.

The Chinese have a history of ancestor worship and hierarchical gov't and respect for elders so they will probably tend to be more open to obeying authorities, specialists, and experts. I don't think this will last much longer, though, so hopefully China will be able to finish any important major works projects before things fall apart.

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