India's most influential government think-tank has recommended lowering taxes and interest rates for loans on electric vehicles, while capping sales of conventional cars, signaling a dramatic shift in policy in one of the world's fastest growing auto markets.(Reuters Photo)

China Considers Extending Tax Cut for Small Engine Cars: Govt Official


OCTOBER 27, 2016

Shanghai. China is considering extending a tax cut for small engine cars, an industry ministry official said on Wednesday (26/10), a move that could help sustain a sales rebound in the world's largest auto market.

"We are working with related agencies to study incentives for energy-saving and new energy vehicles," said Qu Guochun, a deputy director at the Ministry of Industry and Information Technology (MIIT). "For example, we are studying an extension of the tax cut for 1.6-liter energy saving cars."

China is "in the process of optimizing and adjusting its subsidy policies for new energy vehicles", Gu said at a conference in Shanghai, according to a transcript of his speech released by the conference organizer.

China's auto market has rebounded strongly since October last year when the central government cut the sales tax on vehicles with engines of 1.6 liters or smaller in response to slower sales in a weakening economy.

Experts and auto industry associations have predicted a steep drop in growth if the tax cut is allowed to expire as planned at the end of this year.

But the country has also seen a subsidy-cheating scandal recently, with the government accusing more than 25 car makers, including Nissan and Hyundai, of breaking rules on green car subsidies, casting a pall over the country's drive to support the industry and combat heavy pollution which affects large swathes of the country.

China spent $4.5 billion last year in subsidies for such vehicles, although it is set to gradually phase out the payments by 2021. The plan has helped sales of electric and plug-in hybrids more than quadruple last year to 331,000 vehicles.