Tuesday, January 27, 2009

Even More Help for China's Automakers

In yet another sign of how much China's government values the viability of its auto industry, the central government announced yesterday even more measures to help automakers weather the recent downturn in sales and to further develop alternatively fueled vehicles.

In a previous post I noted that the State Council would be halving the sales tax on smaller cars, helping farmers to exchange inefficient vehicles for low-emission vehicles and contributing 10 billion RMB for the development of alternatively-fueled vehicles.

The next day, China's Central Bank announced a number of financial measures designed to support capital funding for auto companies and to support an increased availability of auto loans to consumers.

The governments of Shenzhen City and Guangdong Province also have announced measures to support a local private automaker, BYD.

Now the Finance Ministry is getting in on the act with a trial scheme to subsidize the purchases of clean energy vehicles in 13 cities. The idea is that the central government would cover the price differential between gasoline and alternatively-fueled vehicles used for public transportation, taxi, postal and urban sanitary services. There was no mention as to whether the subsidies would be restricted only to purchases of vehicles made by SOEs.

Taken together, these are some fairly substantial plans to ensure that, once the recession and financial crisis have passed, there will still be a number of Chinese auto firms around to compete.

There may also be some good ideas here for the U.S. government as it considers how consumers will be encouraged to buy the clean energy vehicles that the Big 3 will be forced to make.