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Farmers get 10% grant to replace old vehicles

FARMERS will get a 10-percent subsidy of their car price if they replace their vehicles as part of the latest government stimulus moves to spur vehicle demand.

From March 1 to the end of the year, farmers who opt to replace three-wheeled vehicles or old trucks for light commercial vehicles or buy mini buses powered by a 1.3-liter engine or less will get a maximum subsidy of 5,000 yuan (US$731), the Ministry of Finance said in a statement yesterday.

From February 1 to January 31, 2013, the central government will also provide farmers a subsidy of 13 percent if they purchase motorcycles. The maximum subsidy for a motorcycle is 650 yuan.

The subsidies "not only bring benefits to farmers, but also are important measures to create domestic consumption," the ministry said.

The measures are part of the 5-billion-yuan auto subsidies in the government's rescue plan for the auto industry, which is banking on stronger demand in rural areas to rev up flagging sales hit by a cooling economy and a financial crisis.

China has also launched similar measures to boost buying of households appliances and has implemented a 4-trillion-yuan stimulus package to spur domestic consumption. The plan announced yesterday also includes a 2,000-yuan subsidy to farmers if they scrap three-wheel vehicles and 3,000 yuan to get rid of low-speed trucks.

Industry analysts earlier estimated that the so-called "Vehicles sent to Village" program would create additional demand for 1 million units this year.

"For cost-sensitive farmers, a 10-percent subsidy is enough and would be effective to boost demand," said Tan Jijia, an auto analyst at Pacific Securities Co.

Tan said that car makers such as Beiqi Foton Motor Corp, China's largest light commercial vehicle maker, SAIC-GM-Wuling Automobile Co, the biggest minivan maker, and Chang'an Auto Group would be the main beneficiaries of the program.

The government approved tax cuts and subsidies in mid-January to lift sales. It temporarily halved the purchase tax for automobiles with engines smaller than 1.6-liters to 5 percent.


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