The government's subsidy plan for trade-in vehicles is expected to spur stagnant commercial vehicles sales in the following months, just as favorable taxation and subsidy policies for rural consumers boosted passenger vehicle sales in the first half, analysts said yesterday.

Consumers will receive a subsidy of between 3,000 and 6,000 yuan per vehicle to replace passenger cars, vans, and trucks that do not meet the country's emission standards, or for those vehicles that have been on road for 8 to 12 years, according to the policy released yesterday by the Ministry of Commerce.

The total trade-in subsidy, mainly targeting light commercial vehicles, is likely to cost the government around 5 billion yuan.

The policy will apply to all vehicles traded in between this June and May 31, 2010. And, vehicles owners will be able to apply for the subsidy payout between Aug 1 and June 30, 2010.

"It is a positive and effective measure to drive sales of commercial vehicles in the second half and next year," said Hui Yumei, an auto market researcher with consulting firm Sinotrust Co.

"The policy will help sales of light trucks, vans and minibuses. China's infrastructure sector too is in need of a large number of light commercial vehicles," said Luo Lei, vice-secretary-general of China Automobile Dealers Association.

"Moreover, the move will further drive domestic consumption and improve energy efficiency," said Zhao Ying, a researcher at the Institute of Industrial Economics under the Chinese Academy of Social Sciences. "It's a good idea that a relatively small fund would draw in huge automobile consumption."

According to a forecast by China Automotive Technology and Research Center, the trade-in policy will add at least 300,000 commercial vehicles to whole-year sales.

The country will scrap 2.7 million vehicles this year; the petrol consumption of old vehicles is 5 to 10 percent higher than new ones, the Ministry of Commerce said.

In the first six months, China sold 4.5 million passenger cars, a 25.6-percent increase from a year ago, as the government's tax reduction and subsidy spurred small car sales, according to China Association of Automobile Manufacturers.

However, commercial vehicle sales saw a 0.52 percent drop year-on-year in the first half due to the effect of the financial crisis.

(China Daily July 15, 2009)