China Increases Scrappage Subsidy

While flagging Western markets are offering handouts to carmakers in order to lubricate sales, in China – with a car market still widely regarded as booming by comparison – has announced that it is to increase its own scrappage budget from one billion yuan (£95.6 million, $146 million) to six billion yuan (£573.6 million, $876 million). According to a China4Auto.com report, the move follows the success of the incentive program in rural areas.

In a meeting presided over by Chinese Premier Wen Jiabao on 19 May 2009, the Chinese State Council reportedly decided to “significantly increase subsidies for new car purchases in return for replacement of aged vehicles.” Owners of trucks and buses exceeding a certain age or cars failing to meet certain environmental standards can will also be eligible to receive subsidies new-for-old subsidies.

Beijing began by offering tax cuts for buyers of small vehicles with 1.6-litre or less engines in January. By March, Beijing had introduced a car purchase support programme and began to pay a 10-per cent subsidy to rural residents who bought cars with 1.3 litre or less engines, or small trucks to replace three-wheeled vehicles or aged cars.