Tougher fuel rules for car subsidy

PUBLISHED : Saturday, 17 September, 2011, 12:00am
UPDATED : Saturday, 17 September, 2011, 12:00am


Beijing has tightened the minimum fuel-efficiency requirements for small-engine passenger cars to qualify for a national 3,000-yuan (HK$3,662) purchase subsidy.

Starting on October 1, cars with engines of 1.6 litres and smaller must be between 8 per cent and 42 per cent more fuel efficient to qualify for the subsidy, according to a announcement yesterday by the National Development and Reform Commission and the ministries of Finance and Industry and Information Technology.

The mainland first introduced the subsidies for small-engine cars in June last year. The revised fuel-efficiency standards now depend on a particular car's weight, its type of transmission and its number of seating rows.

For example, manual-transmission cars weighing 1,205-1,320 kg must now consume 6.3 litres of petrol per 100 kilometres to qualify. That compares with 6.9 litres per 100 kilometres previously.

The biggest impact will be on cars weighing more than 1,320 kg, which could previously guzzle as much as 11.5 litres per 100 kilometre and still qualify for the subsidy. The threshold for these heavy cars has been slashed to 6.7 litres per 100 kilometres.

Because it is a flat 3,000-yuan subsidy regardless of a car's selling price, the small-engine subsidies are most significant at the lower end of the market.

On a popular mini-car like the Chery QQ, which retails from as little as 30,000 yuan, the subsidy is equal to a 10 per cent discount on the purchase price.

But the expiration of a number of tax breaks at the start of this year has seen the market share of such small-engine cars retreating from the levels they saw in 2009 and 2010, when more aggressive stimulus measures were in place.

Sales of cars with engines 1.6 litres and smaller have been declining on a relative basis all year, and accounted for only 66.5 per cent of all sales in July, according to figures from data provider CEIC.

That is down from 70.3 per cent last year and 71.2 per cent in 2009, when tax breaks were in effect, and compares with a market share of 63.4 per cent in 2008 and 60.7 per cent in 2007 - before the purchasing incentives were introduced.