China economy: ‘magnitude’ of local subsidies, tax cuts to boost slumping car sales seen as too small
- The central government announced that it will cut the purchase tax for selected cars by half for the remainder of the year
- Car sales fell by more than 60 per cent in April as overall consumption tumbled in recent months amid a number of lockdowns in some of China biggest cities
Local authorities in China are rolling out a series of stimulus measures to boost slumping car sales, but questions have been raised over the effectiveness of the various tax cuts and subsidies amid a broad economic slowdown.
In addition, there will be a new round of “Go Rural” subsidies to encourage residents in smaller cities to buy new energy vehicles.
Bigger cities, including Shenzhen, Shanghai and Beijing, have followed up with various subsidies and tax cuts, but the effectiveness of the stimulus is likely to be limited.
We believe the overall magnitude of these locally-based measures is small as not all cities can afford such consumption stimulus packages
“We believe the overall magnitude of these locally-based measures is small as not all cities can afford such consumption stimulus packages,” according to a Goldman Sachs report on Friday.
As consumption tumbled in recent months amid a number of lockdowns in some of the biggest Chinese cities, local and central governments were eager to introduce a raft of supportive policies to boost car sales which fell by more than 60 per cent in April.
Car sales in Shanghai, which only exited its large-scale two-month lockdown on Wednesday, fell to practically zero in April, according to the Shanghai Automobile Sales Industry Association.