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Stimulus package could boost China auto sales
By Yang Yipeng |
June 6, 2012, Wednesday
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Print Edition
Print Edition
ON May 28, Reuters reported that the Chinese government plans to reintroduce its automobile subsidy program. According to the report, the new round of subsidies will differ slightly from the previous automobile stimulus policies implemented in 2009.
Specific small car models will be the main target of the subsidies in order to bring more fuel-efficient vehicles to the road. The details are: 1) Cash-for-clunker: following the same regulations implemented in 2009, buyers scrapping old and/or heavy polluting vehicles will be entitled to vouchers of 3,000 yuan (US$475) to 6,000 yuan, depending on vehicle type; 2) Auto-go-rural: farmers will be eligible for 10 percent discounts on car purchases, or up to as much as 5,000 yuan for each car, following the 2009 regulations.
Assuming the media report is accurate, we see two possible implications here: 1) the launch of the auto-go-rural policy may potentially boost new car sales in 2012 (we keep our passenger car 2012 year-on-year growth estimate of 10 percent unchanged), and we see small displacement cars, minivans and light commercial vehicles as beneficiaries; and 2) the cash for clunker policy may have limited impact on new car sales due to implementation difficulties from lengthy process and multiple intermediaries, but it is in line with government plans to reduce emissions.
Specific small car models will be the main target of the subsidies in order to bring more fuel-efficient vehicles to the road. The details are: 1) Cash-for-clunker: following the same regulations implemented in 2009, buyers scrapping old and/or heavy polluting vehicles will be entitled to vouchers of 3,000 yuan (US$475) to 6,000 yuan, depending on vehicle type; 2) Auto-go-rural: farmers will be eligible for 10 percent discounts on car purchases, or up to as much as 5,000 yuan for each car, following the 2009 regulations.
Assuming the media report is accurate, we see two possible implications here: 1) the launch of the auto-go-rural policy may potentially boost new car sales in 2012 (we keep our passenger car 2012 year-on-year growth estimate of 10 percent unchanged), and we see small displacement cars, minivans and light commercial vehicles as beneficiaries; and 2) the cash for clunker policy may have limited impact on new car sales due to implementation difficulties from lengthy process and multiple intermediaries, but it is in line with government plans to reduce emissions.
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