China to end auto tax incentives image

China will end tax incentives for small cars on January 1, the finance ministry said on Tuesday.

“Effective from January 1, 2011, a sales tax of 10 per cent will be imposed on cars with a 1.6-litre engine or smaller,” said the ministry on its website.

Expectations of the tax change are one factor that caused analysts and industry executives to predict that sales growth in China, the world’s biggest car market, will likely slow in 2011 to around 10%, from around 30% this year.

It did not say whether a 3,000 yuan ($450) rebate for fuel-efficient cars would be remain in place along with subsidies for farmers who exchange used vehicles for new ones.

The purchase of cars with smaller engines makes up 60 per cent of car sales in China. Increased demand for vehicles has seen the country overtake America as the world’s largest auto market.

Source: LA Times