China Auto Group Urges Permanent Tax Cut to Boost Small-car Demand

China should make a tax cut on small cars permanent to encourage the development of fuel-efficient vehicles, according to the China Association of Automobile Manufacturers.

The state-backed group is lobbying the National Development and Reform Commission and Ministry of Industry and Information Technology to include such a policy in their planning, said Ye Shengji, the association’s deputy secretary general.

“It’s very necessary to have the policy in place on a long-term basis,” Ye said in Beijing on Monday. “The policy will not only boost consumption but also help direct the industry trend. We believe we should include the encouragement of small-car development into our industry planning guidelines.”

The call to extend a tax cut due to expire at the end of this year comes as auto sales rose for seven of the past eight months. China had cut the levy by half in October on small-engine cars after lobbying by the carmakers association, which had argued that robust vehicle sales were needed to buttress slowing economic growth.

The auto group’s push for small cars also follows China mandating the lowering of average fuel consumption to 5 liters by 2020, from 6.9 liters per 100 km last year. Auto sales climbed 11% to 1.79 million units in China last month, according to data released by the association.