Automakers in China are following the government in rolling out more incentives to boost car sales, which slowed as the country battled Covid outbreaks with strict lockdowns that have sapped consumer spending.
To give sales a lift, the likes of SAIC Motor Corp., Volvo Car AB and Geely Automobile Holdings Ltd. are taking steps such as covering or subsidizing the purchase tax on vehicles, providing preferential financing rates, extending loan repayment dates and offering to cover insurance costs.
On Tuesday, China announced it would halve the purchase tax on low-emission passenger vehicles with no more than nine seats that were sold from June to December for $45,000 or less. Earlier in May, the government said its tax reductions for cars would amount to $8,996,906,800. Citigroup Inc. said that topped expectations and could raise sales up to 2.5 million cars.
China passenger vehicle sales slid 36 percent in April from a year earlier, the biggest drop in two years.
Not a single new car was sold in Shanghai that month as the financial hub was stuck in a Covid lockdown and dealerships were closed. With consumer spending and other economic indicators contracting, Premier Li Keqiang called on local governments to "act decisively" to support growth.
Dongfeng Motor Group Co., Geely and SAIC Motor Corp., together with their international partners, offered to cover the remaining purchase taxes on some sub-$45,000 yuan models following the government cut. Meanwhile, a Volvo sales promotion pledged to cover 50 percent of the purchase tax on its imported XC90 sports utility vehicles, which have a starting price of $135,000.
SAIC-GM-Wuling Automobile Co., which makes China's most popular mini electric vehicles, said on its WeChat account that it will provide $150,000 of subsidies in June following the government's call to promote consumption. Pure EVs have been exempted from purchase taxes since as early as 2014.
Local government are pitching in too, with Shandong province doling out subsidies for fossil-fuel cars and EVs, while Shenzhen and Guangzhou are offering subsidies for EVs and expanding license-plate quotas for other cars. Shanghai has increased its quota for car ownership this year by 40,000, and Jiading District in the north of the city will offer subsidies of up to $3,000 for individual car purchases, it said in a statement Wednesday.
"Increasing car consumption will play a significant role in driving the recovery of overall consumption and maintaining the sustainable development of the auto industry," Sheng Qiuping, a deputy commerce minister, said Tuesday.
