BEIJING -- The Chinese government will end subsidies for vehicles sales in rural areas starting Jan. 1, three days after announcing a halt in incentives for buyers of small vehicles.
At the same time, China said today it is extending subsidies to buyers of fuel-efficient cars next year.
The incentives being stopped in rural areas include those for small cars and trucks, the Ministry of Finance said in a statement on its website. That will end a policy started in March 2009 to foster automobile demand at the height of the global recession.
Major mini-vehicle makers, such as Chongqing Changan Automobile Co Ltd and GM-SAIC-Wuling, would be affected by the latest policy shift as minivans and pickup trucks are popular in rural areas, analysts say.
However, many domestic and foreign players, including GM, Changan and Ford Motor Co., would continue to benefit from Beijing's handouts for fuel-saving models, they added.
GM-SAIC-Wuling is General Motors Co.'s three-way venture with SAIC Motor Corp Ltd. and Wuling Auto in southern China.
The government said Dec. 28 said it will raise the sales tax on vehicles with engines of 1.6 liters or smaller to 10 percent from its current 7.5 percent. The tax was 5 percent last year.
Policies including a consumption-tax rebate, subsidies for rural car buyers and incentives of up to 18,000 yuan to trade in older models helped China's total vehicle sales jump 46 percent last year. The nation overtook the U.S. to become the world's biggest automobile market.
China's vehicle sales may reach 20 million units in 2011, according to Bill Russo, Beijing-based senior adviser at Booz & Co.
Bloomberg News and Reuters contributed to this report