(ECNS) -- China's automobile market will gain a strong boost now that the country has decided to halve the purchase tax for eligible passenger vehicles on Tuesday, experts told China News Service, adding that vehicle consumption driven by the policy and subsidies from car companies may exceed 300 billion yuan (about $44.8 billion).
China will slash the purchase tax by half for passenger cars under 300,000 yuan (about $45,040) with engine displacements within two liters purchased between June 1 and Dec 31 this year, said a notice jointly released by the Ministry of Finance and the State Tax Administration on Tuesday.
"The policy will benefit more than 10 million vehicles and boost more than 1.5 million car sales,” said Liu Bin, an expert from the China Automotive Technology and Research Center.
In addition to the policy, vehicle companies have also introduced subsidies. At present, more than 20 vehicle companies, including SAIC Volkswagen, Dongfeng Nissan, Changan Automobile, and Geely have provided additional subsidies based on the halved purchase tax. For example, consumers who purchase some popular models will be "partially exempted" or "completely exempted" from the remaining purchase tax.
“The vehicle consumption driven by the policy and subsidies from car companies may exceed 300 billion yuan. The consumption will bring greater benefits to upstream manufacturers and downstream insurance and financial service providers,” Chen Shihua, deputy secretary of the China Association of Automobile Manufacturers, told China News Service.
The new wave of the pandemic has led to the suspension of the automobile industry chain in Shanghai since late March, which has directly affected production and sales of automobiles. Data shows that in April, retail sales of automobiles was 256.7 billion yuan, a year-on-year decrease of 31.6 percent, and the production and sales of automobiles dropped by more than 40 percent.