Wednesday, March 11, 2009

Stimulating cars in China 

China vehicle sales surged 25 percent in February, the first gain in four months, after the government cut taxes on some models, helping the country extend its lead as the world�s largest auto market this year.
Sales of passenger cars, buses and trucks climbed to 827,600, the China Association of Automobile Manufacturers said today in Beijing. The tally in the first two months rose 2.7 percent to 1.56 million, compared with a 39 percent decline to 1.35 million in the U.S.

China has halved retail taxes on small cars and drawn up plans to give out vehicle subsidies in rural areas to revive demand after auto sales rose at the slowest pace in a decade last year. Combined with the country�s wider 4 trillion yuan ($585 billion) economic stimulus package, the policies have caused General Motors Corp. to roughly double its forecast for China�s nationwide auto market growth this year.
Via Bloomberg. (h/t: Dave.) It's a major bounceback from January. The Chinese government isn't signing on to vouchers yet, but there's pressure and four regional governments have already done so. (We noted the vouchers here last week.) Instead, last month the Chinese government halved the tax on new car purchases for small-engine cars (under 1.6L.)

One may recall that there was strong bipartisan support in the US Senate for similar proposals, and some of that went through (though to get the credit on buying your first house, you have to buy before November 30 and hold the house three years. At a lunch talk I gave today, someone in the audience said that three people at her firm had bought homes in the last two months in part to capture the potential $8000 benefit.) The auto credit is to allow you to write off the sales tax on a new car purchase (if the car is under $49,500 -- doesn't Obama like Cadillac?) But the effect of that deduction isn't likely to be felt until 2010, so there isn't much good there to jump-start things right now, as the cut in the registration fee does. Heard of any state cutting taxes on new car purchases? Me neither.