Government gets tough on auto subsidies
Government subsidies on fuel-efficient vehicles have contributed to strong sales but few models will benefit.
Vehicle sales in China showed an unexpected 8% year-on-year rise this September to 1.6 million units, the second highest this year, due in part to government subsidies on fuel-efficient vehicles. Since 2010, the government has been offering a 3,000 yuan ($469) subsidy on 340 different models with 1.6 litre engines or smaller, which has been enough to keep sales figures from falling, claims JD Power analyst Marvin Zhu.
Exports have also played a key role in increasing sales as auto shipments in the first nine months totalled 345,000 units, the highest volume since 2008. Major Chinese car exporters, such as Geely, Great Wall and JAC all saw export figures rise over 10% this year, largely due to demand from emerging markets fuelling sales.
However, from October 2011 the National Development and Resource Commission (NDRC) will impose more stringent regulations on the specific models that will be eligible for the grant, meaning only 49 models will qualify for the 3,000 yuan subsidy.
Some industry analysts predict the sharp fall in the number of eligible models will cause market growth to slow for the rest of the year. Cui Dongshu, Vice Secretary-General of the China Passenger Car Association, predicts: “China's home-grown car makers would be more affected as they are more competitive in the subcompact car segment”, which now has fewer models that meet the new NDRC standards.
