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Tax cuts, subsidies boon for GM China

By Li Fangfang (China Daily)
Updated: 2009-04-28 14:46

General Motors Corp can thank US taxpayers for $13.4 billion in loans that have kept it running. The carmaker can also thank China's government, which is kicking in subsidies of as much as $1,170 to help it sell vans.

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The automaker's China minivan venture boosted sales 32 percent in the first two months after a cut in retail taxes on small vehicles. The government is now giving out 5 billion yuan ($732 million) in subsidies to spur auto sales in rural areas.

GM doubled its 2009 forecast for China's market growth as the tax cuts and subsidies revived demand. By contrast, the US carmaker's domestic sales have slid 51 percent, forcing it to seek as much as $16.6 billion more in government aid.

Vehicle sales in China may increase between 5 percent and 10 percent this year, predicted GM, the largest overseas automaker in the country. It had previously forecast sales growth of less than 3 percent. The automaker expects to outperform the wider market by as much as 3 percentage points, helped by sales at SAIC-GM-Wuling Automobile Co, the largest minivan-maker in China. The venture accounts for at least half of GM's China sales.

"There's a very direct link between the government's efforts to boost rural consumption and Wuling's rising sales," said Nick Reilly, GM's Asia-Pacific president. "The government has also come out with its stimulus package and the stock market is up and that's giving people confidence to spend again."

SAIC-GM-Wuling sales rose to 72,947 vehicles in February, about 50 percent more than a year earlier, according to the China Association of Automobile Manufacturers. In January, the government halved retail taxes on vehicles with engines of 1.6 liters or less. The tax break, covering more than half the market, helped end three months of falling nationwide sales...

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