China's low-emission car sales recovered from low levels nationwide during the National Day holiday, following the State Council announced that cars of 1.6L displacement or under would enjoy half purchase tax reduction from October 1, 2015 to December 31, 2016.
The State Council has also launched several other measures to revive the automobile industry, such as supporting new energy car sale and development of power batteries, forbidding local governments to set limits on electric car purchase and ensuring proportions of electricity powered buses.
Analysts believe the stimulating measures will likely boost China's car demand in 2015 and 2016, and drive the recently undervalued automobile industry-related stocks to the normal range, especially for the companies whose business is mainly in new energy cars and low-emission cars.
Zhang Huiying, manager of a car sale company in Zibo, Shandong province, said take a 100,000 yuan car as an example, halved purchase tax would directly save over 4,000 yuan for the consumer, and the policy has effectively pushed up sales of low-emission cars. China's automobile market has been cooling since 2015.
Statistics from the China Association of Automobile Manufacturers show that car sales reached 1.66 million in August, rising 10.74 percent on month but falling 2.98 percent on year; from January to August, car sales stayed flat from a year ago at 15.01 million.
However, most car dealers say because market performance was far below expectations in the first eight months, they can hardly meet the targets for the year though sales in September and October increased. Xu Minfeng, an analyst of the car industry at Central China Securities, says China's car industry improved in August with production and sale ending monthly decline but the figures kept falling on a yearly basis.
During the National Day holiday, many car sellers offered price discount or low interest rates to attract consumers In fact, this is not the first time China launched purchase tax reduction policy for cars of 1.6L displacement or under. In 2009, China decided to lower purchase tax by from January 20 to December 31 of the year, and China's automobile production and sale were respectively boosted to 13.79 million and 13.64 million, rising by 48 percent and 46 percent on year.
Xu says cars of 1.6L displacement or under account for a large share of China's car market and the tax cut has helped many wait-and-see buyers to make the decision to take action. He expects the effect to last for a period of time.
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