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Govt mulls incentives to boost car sales

(Xinhua)
Updated: 2008-12-27 13:51

China plans to stimulate sales of new cars by offering incentives for people to scrap their old cars, an official with the Ministry of Commerce said Friday.

He said the ministry would give car owners subsidies to scrap old cars and buy new ones in a bid to revive the country's new car market, which had seen a 3.8-percent sales decline in November.

"Details of the plan will be announced very soon," he added.

In Shanghai, a similar plan has already worked. New car sales were up more than 10 percent at a local Volkswagen retailer, which began offering car scrap bonuses of 3,000 yuan ($429) a month earlier.

The ministry's plan is among a stream of moves to bail out the country's auto industry. Other planned measures include car purchase tax cuts and improved credit services for car transactions.

It is important to keep new car sales growing as the auto industry plays a crucial role in the country's economy, analysts said.

Related readings:  China's auto industry faces pay cut and layoff in 2009  Growth in China auto production, sales slow down  China considers policies to save auto market  Recession rears ugly head, global auto sales shrink

During the past 11 months, profits of the country's industrial companies, including auto manufacturers, increased only 4.9 percent, a record slow growth, according to the statistics bureau.

Premier Wen Jiabao said "the auto industry's current difficulties are what concern me the most," in a recent inspection trip to southwestern Chongqing, a city where the auto industry weighs heavily on local economy.

"Reviving the auto industry will be helpful to spur domestic demand because a one-yuan-increase in this sector's output means 2.64 yuan in others on the industry chain," said Zhang Boshun with the China Association of Automobile Manufacturers.

In China, auto-related industries totaled 156, according to statistics available. Among them are steel and petrochemical companies with huge numbers of employees.

But some experts said the plan was unlikely to change the situation because most Chinese car owners bought their cars within the past six years and they might not need new cars.

With a tighter budget, private companies might not be able to afford new cars, a salesman said.

Globally, the ailing Big Three are still on the verge of bankruptcy, Toyota Motor, the Japanese auto giant, announced on Monday it expected the first loss in 70 years.