China raises taxes on large cars

The move is part of the government’s efforts at cutting energy consumption.

China’s finance ministry said it will raise taxes on large automobiles while cutting rates for smaller cars in an effort to spur demand for fuel-efficient vehicles in the world’s second-largest oil-consumer.

The government will double the tax rate to 40 per cent for automobiles with engines larger than 4 litres in capacity starting Sept 1, the finance ministry said on its website.

The tax on vehicles between 3 litres and 4 litres in engine size will be raised to 25 per cent from 15 per cent, the ministry said.

Automobiles account for about half of China’s total oil consumption, and this may rise to 60 per cent by 2020, according to the Development Research Center of the State Council.

China, the world’s second-largest auto market, raised the price of gasoline, diesel and other fuels in June to cool its economy and reduce energy use.

“The move is part of government’s efforts of cutting energy consumption,” said Yu Bing, an analyst with Pingan Securities Co.in Shanghai.

“It will help increase sales of small cars and damp demand for bigger vehicles.”

Cars with engines of 1 litre capacity or less will become cheaper, with a 1 per cent tax rate instead of the current 3 per cent, the finance ministry said.

Sedans with engines between 3 and 4 litres were the fastest-selling models last year in China, with sales rising almost six-fold to 12,100 units, according to the China Association of Automobile Manufacturers.

Sales of cars with engines less than 1 litre fell 31 per cent to 251,700 units last year.