China hopes to put the brakes on the popularity of big, gas-guzzling cars – but without further eroding overall sales volume in what has become a sluggish domestic auto market.
Mainland passenger car sales growth slowed to 6.8% year-on-year in July, the weakest level in two years. Total sales of passenger cars, sport utility vehicles and multipurpose vehicles reached 488,200 during the month, putting auto sales for the first seven months of the year at 4.1 million, up 16% on the same period last year.
China’s carmakers are expected to miss their full-year sales targets as consumers tighten their belts. Vehicle sales rose by 22% to 8.8 million units last year and early predictions for 2008 came in at around 10 million units, an increase of 14%.
But Automotive Resources Asia, a division of JD Power, lowered its growth forecasts for the mainland auto market to 10% for this year, down from 15%.
Last year sales of 3-4 liter sedans rose six-fold to 12,100 units, while sales of cars with engines less than 1 liter fell 31% to 251,700. The government has turned to taxation as a means of reversing this trend. It wants to reduce the nation’s oil consumption, of which autos account for about half.
The sales tax imposed on large vehicles – those with engines bigger than 4 liters – was raised to 40%, from 20%, effective September 1. For 2-4 liter cars the tax rate is now 25%, up from 15%, while cars with engines of 1 liter or below are subject to tax rate of just 1%, down from 3%.