Tax Cuts Boost Car Sales in China

November 12, 2015 Taxation in China

BEIJING – Tax cuts on small capacity cars in China have yielded positive results, prompting a resurgence of sales in the flagging car industry.

New tax cuts have spurred the sale of automobiles in China, according to new information released on November 11th by the China Association of Automobile Manufacturers.

Over the month of October approximately 1.94 million passenger cars were sold in China, a level which is 13 percent higher than that seen over the course of the same month last year.

The increase has been attributed to the government’s decision to halve the 10 percent sales tax on any passenger vehicle with an engine capacity not exceeding 1.6 litres.

Such small vehicles are widely popular in China, and are estimated to make up as much as 70 percent of new sales.

While sales figures have seen a surge in October, over the first 10 month of the year car sales have risen by only 3.3 percent compared to last year, a level which is much lower than the 10 percent rise seen over the same period in the previous year.

The car industry in China has seen diminishing growth over the last 5 years, which has prompted car manufacturers from China and abroad to cut production.

This is not the first time that China has cut taxes on cars in order to boost sales, as in 2009 a similar tax cut prompted a 53 percent increase in sales.

By: Marianna