After comparing different brands for more than a year, Yan Likang finally put down a deposit on an Audi car at an auto show in Nanning, capital of south China’s Guangxi Zhuang Autonomous Region, in June.

The 36-year-old decided to make the purchase shortly after China slashed the car-purchase tax. “For my car model, the tax cut will save me nearly 8,000 yuan (about 1,190 U.S. dollars),” he said. “It’s perfect timing for a car purchase.”

Recently, China has unveiled a slew of stimulus policies to revive the auto market and stimulate consumption. The government halved the car-purchase tax for passenger vehicles priced at no more than 300,000 yuan and with 2-liter engines or smaller, effective from June 1 to the end of the year.

In late June, an executive meeting of the State Council decided on policies to provide greater support to automobile consumption, including boosting the used car market and supporting new-energy vehicle (NEV) purchases by extending the NEV tax exemption policy. Car makers are also providing promotional offers to fuel sales.

The world’s largest automobile market recovered immediately in June due to the cut in car-purchase tax.


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“Our sales rebounded nearly 20 percent month on month in June as many customers were no longer maintaining a wait-and-see attitude after the tax cut,” said Tu Chou, general manager of Guangxi Jurong Automotive Sales Service Co., Ltd., an Audi dealer.

The dealer’s bustling business reflects the performance of the wider auto market in China, which regained strong momentum in June after dropping for three consecutive months.

A total of 2.5 million motor vehicles were sold in June, up 23.8 percent year on year and up 34.4 percent month on month, data from the China Association of Automobile Manufacturers (CAAM) shows. Sales of passenger vehicles soared 41.2 percent year on year to 2.22 million units in June, data shows.

Auto production and sales fell sharply from mid-March to April as the resurgence of COVID-19 in Jilin Province and Shanghai disrupted the supply chains of the auto sector, CAAM said. Other factors, including the car chip shortage and rises in costs of raw materials for automotive batteries, also weighed on the market.

Some 1.1 million cars enjoyed China’s car-purchase tax cut during the first month of the policy’s implementation, saving about 7.1 billion yuan for car buyers, according to the country’s top taxation agency.

“The car-purchase tax cut policy is a silver bullet for stimulating consumption,” said Cui Dongshu, secretary-general of the China Passenger Car Association.

Many local governments across the country are also offering purchase subsidies and easing purchase restrictions to boost car sales. All of these stimulus measures could bring additional sales of about 2 million cars, Cui said.

The auto sector is a pillar industry of the national economy, and boosting the automobile market is essential to guaranteeing employment and stabilizing economic growth, according to experts.

Automobile consumption is recovering thanks to the stimulus policies and the easing of the COVID-19 epidemic and the car chip shortage, said Chen Lifen, a researcher with the Development Research Center of the State Council.

“The implementation of these policies is expected to increase automobile and related consumption by about 200 billion yuan this year, which will effectively boost consumer confidence and drive the recovery of consumption,” Chen said.

Originally published by Xinhua