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China Unveils Support Package for Auto Industry

Xinhua. China’s State Council introduced a government support plan for the auto industry, one of its “pillar industries”. Elements of the plan for the auto industry include:

  • Lowering the purchase tax on cars of less than 1.6 liters displacement from 10% to 5% from 20 January through the end of 2009 to stimulate sales.

  • Allocating 5 billion yuan (US$731 million) to provide one-off allowances to farmers to upgrade their three-wheeled vehicles and low-speed trucks to mini-trucks or to purchase new mini-vans of less than 1.3 liters displacement from 1 March through the end of the year.

  • Increasing subsidies for people to scrap their old cars.

  • Eliminating regulations that restrict car purchase.

  • Encourage large auto companies, as well as major auto-parts makers, to expand through mergers and acquisitions so as to optimize resources and improve their competitiveness on the international market.

  • Over the next three years, providing a 10 billion yuan (US$1.46 billion) as a special fund to support auto companies to upgrade technologies, and develop new engines that use alternative energies.

  • Offering financial support to promote the use of energy-saving autos and those fueled by new energies.

  • Support automakers to develop independent brands and build auto and parts export bases.

  • Urge improvements in the credit system for car purchase loans. More than 93% of Chinese vehicles are sold in the domestic market, but less than 10% are purchased on credit.



Problem is increased motor vehicle pollution in exchange for domestic sales subsidies (aka "bailouts.")

"The mean concentration of fine particles inside a car could reach levels up to 25 times the WHO air quality guidelines. The main source of in-car air pollution is the vehicle in front of you since air intakes and exhaust pipes are located at the same level."


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