Expand or abolish? 1.6L purchase tax cut

Industry guess: trend of purchase tax concessions for passenger cars with a displacement of 1.6 liters are still a mystery .As a result, some prospective buyers hesitate on their choice to buy cars.

Under the new policy of purchase tax concessions for passenger cars, sales of passenger cars with a displacement of 1.6 liters increased by 55.5% in the first eight months of 2009, much higher than forecast. Additionally, sales of sedans with a displacement of 1.6 liters also increased more than 50%.Thanks to the favorable polices ,demands for cars in Foshan couldn’t be satisfied for three times this year, industry analyzed the main reason for the shortage of cars could be caused by the half purchase tax concessions.

Whether it is the best time to purchase cars or not now? Industry earlier predicted that the half purchase tax concessions are likely to be abolished after expiry. However, it is said that Chinese government are planning to expand the scope of purchase tax concessions so as to include passenger cars with a displacement under 2.0 liters .

Market situations, half purchase tax concessions caused shortage of cars many times

In January of this year, after the introduction of half purchase tax concessions, sales of passenger cars whose displacement are under 1.6 liters began to climb up dramatically.

According to National Passenger Car Association's statistics, sales of passenger cars in Foshan reached 7463 units in January 2009 and there was first shortage of passenger cars. Additionally the number of passenger cars sold in March and April respectively reached 5759 and 4746.The number of new vehicle licenses in the first four months in Foshan also reached more than 30000, the third of car sales in May in Guangdong province, just ranking below Guangzhou and Shenzhen,

Although car dealers in Foshan tried to ask cars from manufactures, the number of new vehicle licenses in subsequent two months also surpassed 5000, which culminated in the shortage of cars in August, 2009.

Prospective buyers holding cash at hand hesitating to by cars or not

September and October are good time for car dealers to sell their cars, and there are many promotional gifts or promotional activities such as reduce the car price directly. However, the price of low-emission cars hasn't significantly dropped, so some prospective buyers begin to hesitate.

The price of cars and the time of picking up cars are the main factors considered by consumers when purchase cars. Recently some consumers found that it difficult to buy cars with a displacement under 1.6 liters and 1.8 liters in the market, especially the mid-range cars. Impacted by the half purchase tax concessions, mid-range cars began to in great shortage.

Prospective buyers now hesitate whether it is reasonable to buy cars or not now. Considering there has limited price concessions, half purchase tax concessions are the biggest bright spot. To take advantage of the half purchase tax concessions before expiry or wait for a more preferential policy is really a tough decision to be made by prospective buyers.

Three plans to expand purchase tax

Shanghai Securities News reported that relevant experts predicted Chinese government would issue new policies of purchase tax, but some other experts thought the former purchase tax concessions would not be expired simply, instead Chinese government would enrich its adjustment means. At present relevant departments have formed three adjustment plans:

First, based on the former half purchase tax concessions involving passenger cars whose displacement are under 1.6 liters, Chinese government will broaden the scope of reducing and exempting purchase tax to include all cars whose displacement are under 2.0 liters.

Second, the strength of reducing and exempting purchase tax will be greater than before. Except broaden the scope to include cars whose displacement are under 2.0 liters, Chinese government will exempt purchase tax of cars whose displacement are under 1.4 liters.

Third, after expiry of purchase tax concessions, Chinese government will continue to implement existing policies—to collect half purchase tax concessions of cars whose displacement are under 1.6 liters .

It is reported that the three adjustment plans are still at the departmental level, next step they will be sent to leadership of State Administration of Taxation. Then State Administration of Taxation will discuss the three plans with Ministry of Finance, if the coordination results show that the three plans should be "necessary adjustment", they will be sent to State Council. (Translator Qinghua)

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