Brief Review - Passenger car sector tax revamp not affect sales and consumption structure
Event：
China revamps passenger car tax rates:
China will adjust its vehicle tax rates from Sept. 1 to favor smaller-capacity, more fuel-efficient engines that will cut energy use and reduce emissions, according to a joint online announcement by the Ministry of Finance (MOF) and State Administration of Taxation on Wednesday.
The tax on cars with engine capacities of 3 to 4 liters will rise to 25 percent from 15 percent, with the rate for engines of more than 4 liters doubling to 40 percent. The rate on cars with engines that are 1 liter or less will fall from 3 percent to 1 percent.
Our view:
In 1H08, the sales volume of cars with engine capacities of 3 to 4 liters totaled 16,525, or 0.46% of the total sales of passenger cars. In our view, despite the suppression over sales of high-emission vehicles following the rate hike, the impact on the total sales of the passenger car market is rather limited. Since most high-emission vehicles are high-grade luxury sedan cars and SUVs, the rate hike will not visibly depress consumption for them.
In 1H08, the sales volume of cars with engines capacities of 1 liter or less (subcompact sedan cars, subcompact MPV and cross passenger car) totaled 410,806, or 11.4% of the total sales of passenger cars, down 2 pct points from 1H07. Tax cut for the low-emission vehicles can not spur demand for them due to the unsatisfactory attributes and quality. With improving income and declining price of high-end passenger cars, consumers prefer to purchase cars with engine capacities more than 1.0 liter. In our view, the tax cut will not lead to boom of this type of cars.
In 1H08, the sales volume of cars with engines capacities from 1 liter to 3 liters accounts for 88.2% of the total sales of passenger cars, up 2 pct points from 1H07. This type of cars constitutes the bulk of the passenger car market and the tax rate remains unchanged. Therefore, the tax rate revamp will not affect sales of the bulk of the passenger car market.
Historical experiences also show that under the present taxation regime, the consumption tax rate revamp will not affect the sales volume of the passenger cars and the consumption structure.
China revamps passenger car tax rates:
China will adjust its vehicle tax rates from Sept. 1 to favor smaller-capacity, more fuel-efficient engines that will cut energy use and reduce emissions, according to a joint online announcement by the Ministry of Finance (MOF) and State Administration of Taxation on Wednesday.
The tax on cars with engine capacities of 3 to 4 liters will rise to 25 percent from 15 percent, with the rate for engines of more than 4 liters doubling to 40 percent. The rate on cars with engines that are 1 liter or less will fall from 3 percent to 1 percent.
Our view:
In 1H08, the sales volume of cars with engine capacities of 3 to 4 liters totaled 16,525, or 0.46% of the total sales of passenger cars. In our view, despite the suppression over sales of high-emission vehicles following the rate hike, the impact on the total sales of the passenger car market is rather limited. Since most high-emission vehicles are high-grade luxury sedan cars and SUVs, the rate hike will not visibly depress consumption for them.
In 1H08, the sales volume of cars with engines capacities of 1 liter or less (subcompact sedan cars, subcompact MPV and cross passenger car) totaled 410,806, or 11.4% of the total sales of passenger cars, down 2 pct points from 1H07. Tax cut for the low-emission vehicles can not spur demand for them due to the unsatisfactory attributes and quality. With improving income and declining price of high-end passenger cars, consumers prefer to purchase cars with engine capacities more than 1.0 liter. In our view, the tax cut will not lead to boom of this type of cars.
In 1H08, the sales volume of cars with engines capacities from 1 liter to 3 liters accounts for 88.2% of the total sales of passenger cars, up 2 pct points from 1H07. This type of cars constitutes the bulk of the passenger car market and the tax rate remains unchanged. Therefore, the tax rate revamp will not affect sales of the bulk of the passenger car market.
Historical experiences also show that under the present taxation regime, the consumption tax rate revamp will not affect the sales volume of the passenger cars and the consumption structure.
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