China auto boom unfazed by new
taxes By Wu Zhong, China Editor
HONG KONG - Chinese consumers' desire to
own a car appeared to grow even stronger last
month as both sales and imports of passenger cars
soared, seemingly unfazed by the government's new
luxury taxes, which came into effect on April 1.
The booming automobile market since the
beginning of this year may help ease the Chinese
government's worry that what it deems excessive
investment in the auto industry in recent years
may eventually result in serious overproduction in
upcoming years.
According to statistics
just released by the General Administration of
Customs, China's imports of motor vehicles in the
first four months of this year doubled those in
the same period of last year to reach 72,000
units. China imported 21,000 motor
vehicles in April, the first
month of new taxes on luxury-car sales. Most
imported cars are considered luxurious under
Chinese regulations; hence the strong imports
figure suggests consumers were not bothered by the
levy.
This notion is further supported by
better-than-expected sales of domestically made
cars in April, and in the first four months of the
year in general. April was the fourth consecutive
month to witness strong growth of car sales in
China, according to figures released by the
semi-official Union of National Passenger Car
Market Information. Chinese auto makers sold
373,000 passenger vehicles, including sedans,
sport-utility vehicles (SUVs) and multi-purpose
vehicles (MPVs - usually called minivans in North
America) last month, up nearly 50% from a year
before.
This was despite car buyers'
having to pay newly introduced consumption taxes
in the month. One purpose of the new taxation is
to discourage people from buying large-engined
cars, as Beijing is increasingly concerned with
the country's growing demand for oil. The levy on
cars with a 1,500-cubic-centimeter engine or
smaller is 3%; it increases to 5% for cars with an
engine between 1,500cc and 2,000cc, then jumps to
between 9% and 20% for cars with bigger engines.
But the Union statistics showed that sales
of low-priced compact cars, such as the popular QQ
model made by Chery Automobile, grew more slowly
than the rest of the market. For instance, sales
of SUVs grew by 94.6% during the first four months
of this year.
Thus the sales figures
suggest the government's attempt to curb sales of
luxurious cars has not been successful, as
small-engine compacts seemed to continue losing
market share to gas-guzzling SUVs and MPVs. Even
soaring fuel prices do not appear to have scared
off Chinese customers.
"Those who could
afford [buying luxurious cars] still can afford
[them] after the levy. Those who could not afford
[them previously] still cannot afford [them] even
without the levy," said Wang Yuanhong, an official
with the Economic Forecast Department under the
State Information Center, a think-tank of the
National Development and Reform Commission (NDRC).
Continuous price cuts by Chinese auto
makers helped to boost sales.
Beijing
began to impose macroeconomic controls in early
2004 to curb excessive investment in certain
industries. Under the belt-tightening policy, car
sales began to slow down in late 2004, which
prompted automotive manufacturers to cut prices to
compete for market share. For instance, the price
of Shanghai Volkswagen's Santana, its most popular
model, dropped from 124,000 yuan (about US$15,500
at the current exchange rate) in 2001 to 76,000
yuan ($9,500) in 2005. As a result, car sales
started to pick up in the latter half of last
year.
Rao Da, general secretary of the
Union of National Passenger Car Market
Information, said, "We have achieved 18%
year-on-year growth in the passenger-car sales for
the first four months, beating the earlier
forecast of 17% ... The buoyant sales of passenger
cars reflect the change in people's consumption
thinking in addition to the booming economy in
China, where the car-owner population is still
lower than [in] Western countries."
Rao
said the sales figures for the first four months
strongly indicate the auto market is taking an
upturn, after bottoming out in the latter half of
2005, with total sales of motor vehicles for this
year to well exceed 5 million units, according to
the Guangzhou-based Nanfang Daily.
Union
statistics showed sales of motor vehicles of all
types hit a record 1.68 million units in China, up
by 600,000, or 58.8%, compared with a year ago.
Meanwhile, car output also jumped 51.5% to 1.75
million units for the first four months. Strong
sales boosted auto makers' profits. According to
the NDRC, the auto industry's profits in the first
quarter of this year soared 87.4% from a year
before to reach 15.3 billion yuan.
The
strong sales figures for the first four months of
this year may help ease Beijing's concern that
China's automotive industry may begin to
overproduce within the next few years. In March,
the State Council, the country's cabinet, issued a
circular warning of possible overinvestment in
more than a dozen industries, including auto
manufacturing.
The warning was based on
earlier projections by the NDRC that as capital
kept pouring in to invest in car manufacturing
over the past several years, China's
car-production capacity could reach 10 million
units a year by 2010, while annual national demand
would likely grow to just 8 million.
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