Favorable fuel tax

A slew of interest rate cuts adopted by countries across the world has played an active role in stabilizing the financial market. In the auto segment, car makers are also looking forward to supportive policies from the government to boost sales.

Zhang Boshun, secretary-general of China Auto Industry Association Market Trade Commission, said that for consumers with wait-and-see attitudes, government policies were needed, particular targeting small-engine vehicles and clean energy vehicles.

"Those policies not only serve the national target for energy efficiency and environment protection but also proven to be effective to ease people's concern and spur sales," he said.

The Chinese government is considering incentives including favorable consumption tax and subsidies to manufacturers for developing new energy vehicles to help auto makers boost sales and minimize the impact of the global financial crisis, Chen Jianguo, deputy head of the industrial coordination department of the National Development and Reform Commission told a conference in Tianjin last weekend.

It is reported that China would offer a 10-percent tax break for the purchase of clean energy vehicles such as hybrids and electric cars.

Meanwhile, fuel tax reform could also help sell more small vehicles.

"Dropping crude oil prices now provide a good opportunity to launch the fuel tax reform," Chen Qingtai, research fellow of the Development Research Center in the State Council, said during a recent auto forum in Shanghai.

The Chinese government used to offer huge subsidies for oil refiners to offset their loss caused by high crude oil costs on the global market and low retail prices.

The current fuel tax scheme is widely blamed for the surging demand for big-engine powered vehicles and the high fuel consumption.

Marketing innovations

Leading luxury car brand Mercedes-Benz recently launched interest-free car loans on its high-end S-class vehicles in China.

Consumers only need to pay 30 percent of the price as a down payment when they buy an S350 long-wheel base luxury sedan worth 1.39 million yuan.

Following Shanghai General Motor and Dongfeng Nissan, such auto financing is the latest marketing strategy adopted by car makers to appeal to consumers.

"It is not often a luxury car brand offers car loans," said a dealer of Mercedes-Benz.

"By using these car loans, auto buyers can make their investment more flexible, which helps to stimulate sales among smaller private entrepreneurs," he said.

(Shanghai Daily November 12, 2008)