China may cut second-hand car sales tax to 1%

As one of the measures to stimulate the auto market demand, China may cut the sales tax on second-hand vehicles by half to 1%, Dongfang Daily reported.

An industry insider recently told the Shanghai-based newspaper that China Automobile Dealers Association (CADA) has presented its proposal to the regulatory bodies that the sales tax on second-hand vehicles be reduced by half to 1% as one of the measures to boost sales in China's auto market.

The source said the Chinese government has approved this proposal and is expected to issue a new policy soon for the second-hand car dealing, along with some other incentives for car rental, auto financing, and other related services.

The auto industry support policy released last month by the Chinese government encouraged old-car owners to scrap their old vehicles for cleaner new ones by providing subsidies for this trade-in, but did not specify if it will also subsidize the dealing of "not-very-old" used cars.

Meanwhile, China has cut the sales tax on small cars in half to boost new car sales. Under the plan, the tax on cars with engines smaller than 1.6 liters is taxed at 5%, down from 10%, effective Jan. 20 and continuing until the end of the year.

Last year, used car sales in China reached about 2.5 million units, up 3.1% year on year, much slower than the 24.5% growth rate of 2007. Experts said that many taxes on the dealing have hampered the growth of second-hand car sales.

The car ownership in China now has exceeded 30 million units. If the sales tax on second-hand cars can be reduced to 1%, over 10% of these cars will be traded in or sold for new ones annually and this will boost China's auto market.

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