Stimulus policy to spur car sales in 2009

(Xinhua)
Updated: 2009-01-28 15:38

SHANGHAI - Due to bigger-than expected cut in fuel prices at the end of 2008 and halved car purchase taxes in effect just before the Lunar New Year, China's auto industry can expect the policy stimulus to make the year of the ox a bullish one for sales growth, which was in a ten-year low in 2008.

"With the recent policy changes on fuel price, car purchase tax and fees, I can save more than 8,000 yuan (US$1,170) to have a car," said Wang Yong, who just bought a new POLO sedan produced by Shanghai Volkswagen Co. Ltd.

Like many other auto makers, the company offered discounts of 5,000 yuan for POLO and LAVIDA models during China's Lunar New Year to woo the young working class. The prices for the cars are a little higher than 100,000 yuan, which is generally considered affordable for wage earners in China.

More than 3.1 million small-sized cars were sold in China last year, accounting for 61.54 percent of the total 9.35 million units of vehicles sold in the period, when the year-on-year growth slowed to 6.7 percent, the lowest in ten years, according to statistics with the China Auto Industry Association.

Ye Sheng, an auto industry analyst said that China's auto market is far from saturated -- especially for private vehicles.

He expected the government's stimulus would boost the market sentiment this year.

Ye said that the global financial pinch shrank the demand for business cars, and drove up the cost for auto production. However, China's auto demand continues to growth with the increase of personal wealth.