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Revitalization Plan for Industries
Special> Revitalization Plan for Industries
UPDATED: March 2, 2009 NO. 9 MAR. 5, 2009
Driving Their Way Out
The government's plan to revive the auto industry will keep carmakers barreling full steam ahead

According to the China Securities Journal, Zhang Boshun, Secretary General of the Trade Committee at the CAAM, the revitalization plan is by no means limited to combating the financial crisis. Rather, it points out the direction for the readjustment of the automobile industry's current structure. He also pointed out some crucial conflicts in the auto industry that the plan seeks to address: the conflict between small- engine cars and those with large engines; between new-energy cars and vehicles using traditional fuels; between spare parts and complete vehicles; and between domestic brands and foreign brands.

After the government issued details about its plan for the auto industry, analysts said they anticipated an 8-10 percent increase in car sales this year, despite a few setbacks at the beginning of 2009. Zhang said the stimulus measures would probably continue into 2010.

Great expectations

Car dealers have hailed the revitalization plan, believing that the reduced sales tax on car purchases could rev up demand significantly. That seems to be good news for car salesman like Zhang Hongqiu, who works at an Audi and Land Rover dealership at the Yayuncun Auto Market in Beijing. He usually sells four to five cars a month, but after the outbreak of the credit crunch, his sales dropped 10-20 percent.

Zhang said luxury car sales have not been hit as hard by the current economic downturn as industry analysts have claimed. He said he was not worried about the downturn, because those who purchase luxury vehicles already have plenty of money in the bank and will continue to buy the cars.

Zhang, who also sells small cars at a part-time job, said he expects sales of vehicles with engines that are smaller than 1.6 liters to pick up quickly since the government has cut the sales tax on those cars in half.

"My peers selling those cars are most happy with the government's new policy, because their products are becoming more competitive," Zhang said. Customers can not only save half of the purchase tax, they also spend less on fuel if they buy a car with a smaller engine."

Su Hui, the auto market's general manager, said about 60 percent of the cars sold there have engines that are less than 1.6 liters. He expects sales of these autos to rebound in the months ahead.

Su said the government should dedicate more support to high-end vehicle research and development if it wants to give a major facelift to the auto industry.

"Middle- and high-end vehicles are the mainstay of a nation's automobile strength," Su said, adding that the government's decision to pump 10 billion yuan ($1.46 billion) into auto technology innovation reflected the strategic interests of the country.

Measures to Revitalize the Auto Industry

1) Rev up the auto consumption market. From January 20 to December 31, 2009, taxes on passenger vehicles with engine displacements smaller than 1.6 liters have been reduced to 5 percent from 10 percent. From March 1 to December 31 this year, the Central Government will appropriate 5 billion yuan ($732 million) to subsidize farmers who replace their three-wheeled vehicles with light trucks and small cars with engines smaller than 1.3 liters.

2) Properly reshuffle efforts in the auto industry. The government supports mergers and acquisitions among large car-manufacturing groups as well as among auto parts manufacturers.

3) Subsidize car manufacturers to carry out independent innovations and revamp their technology. In the next three years, a total of 10 billion yuan ($1.46 billion) from the central budget will be dedicated to support technological innovation and upgrades as well as the development of new-energy cars and spare parts.

4) Develop new-energy autos. Promote the large-scale production of electric automobiles and their spare parts. A portion of the central budget will be appropriated to support the promotion of energy-efficient and new-energy cars in big and medium-sized cities.

5) Encourage car manufacturers to build up independent brands, speed up export manufacturing bases for cars and spare parts, bolster the country's modern auto service industry and perfect auto consumption credit services.


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