Incentive buying may boost sale of fuel-efficient cars

Edited and Translated by Han Shasha, People's Daily Online

Chinese automotive analysts predict diminishing car sales in the world's largest auto market, and suggested Beijing restore its previous policy of giving subsidies to customers who consume fuel-efficient vehicles.

"The central government will improve policies to continue boosting the development of the fuel-efficient automotive industry. To be implemented on October 1, the new subsidy scheme will raise the energy-efficiency threshold for carmakers to encourage industrial restructuring, change consumer habits and promote the energy-saving cars," said Xiang Dihai, director of the Economic Construction Department at the Ministry of Finance at the 2011 International Forum (TEDA) on Chinese Automotive Industry Development.

Xiang said that the new scheme will continue allowing carmakers to get a subsidy of 3,000 yuan on cars which consume no more than 6.3 liters of fuel per 100 kilometers, while the previous fuel consumption standard is 6.9 liters. Once the new standard is implemented, 70 percent of 420 types of vehicles on the subsidy list will be removed, of which most belong to Chinese-brand cars.

"To those Chinese-brand car manufactures who produce small-emission vehicles, they will face greater pressure because they cannot dramatically reduce fuel consumption in a short period due to lack of technology and funds," said Jia Xinguang, a senior automotive analyst.

According to the statistics from the China Association of Automotive Manufacturers, during the first half of this year, a total of 3.16 million Chinese-brand cars were sold in China, decreasing 0.82 percent year-on-year. In July, sales of the Chinese-brand cars totaled 178,000 vehicles, a drop of 21.03 percent month-on-month. The sales of the Chinese-brand cars account for 24.59 percent of the total car sales. And its market share has dropped 3.59 percent to the lowest level in recent years.

Although some people hold that the own-brand cars should learn to stand on their own rather than relying on the preferential government policies, it is difficult to change the current situation. For the manufacturers, it is hard to change the impression that Chinese-brand cars are of relative poor quality.

Jia said that consumers are very price-sensitive. Any small amount of subsidy may boost car sales. The government should on the one hand raise the threshold of the subsidy, and, on the other hand give more financial support to Chinese-brand cars producers.

"If the threshold of subsidy for small-emission cars is raised, China's auto industry is bound to see negative growth this year," said Zhao Hang, director of the China Automotive Technology and Research Center.