Small car tax back to 10%
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The purchase tax for vehicles with engines under 1.6 liters will be revised upwards to 10 percent from January 1 next year, the Ministry of Finance said on its website yesterday.
China halved the tax for autos with engines under 1.6 liters to 5 percent in 2009 to boost sales and adjusted the preferential tax rate to 7.5 percent this year.
With the removal of the policy, a buyer of a vehicle worth 80,000 yuan will have to pay 2,000 yuan more in tax.
"Sales of mini cars may be slim next year as few people will be willing to buy them after the expiry of the incentives," said Jia Xinguang, an independent auto analyst.
There has also been speculation that the 3,000 yuan (US$455) subsidy on purchases by rural residents and to upgrade to new cars may also expire on January 1.
Last week Beijing announced a cap on the number of new cars on its roads as part of a series of tough traffic measures designed to ease congestion in the grid-locked capital. A Beijing driver will be allowed to own only one car under his or her name according to the new regulation and the number of new car license plates will be limited to 240,000 next year.
Beijing residents rushed to buy new cars and get them licensed before the new rules came into effect.
"Strong demand has pushed up car prices and there are rarely price cuts at the year end," Jia added.
Yang Zaishun, vice secretary-general of the China Passenger Car Association, said that next year "may see milder growth of between 10 percent and 15 percent" in auto sales.
Rao Da, secretary-general of the association, estimated the expiry of stimulus packages could reduce sales by more than 1 million units.
In the first 11 months, auto sales rose 34 percent annually to 16.4 million units, said the China Association of Automobile Manufacturers.
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