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China to energize used-car market to spur new-vehicle sales
Bloomberg | 2017/3/24

China will take more steps to encourage used-car sales to prompt owners to sell their old vehicles and buy new ones.

The used-car market is likely to continue its rapid expansion, the Ministry of Commerce said in a faxed statement. The ministry added that it has not yet decided whether to resume incentives for rural residents to buy new cars.

The government is counting on a more active used-car market to encourage owners to sell their vehicles and buy new ones -- especially in bigger cities where ownership is restricted because of traffic congestion. Sales of used cars picked up after the State Council ordered most local governments to remove restrictions on used-car registrations last year.

Growth in new-car sales may slow after the government scaled back incentives this year, but deliveries in lower-tier cities and rural areas will expand more quickly than in first- and second-tier cities, the ministry said.

China halved a 10 percent sales tax on small-engine vehicles in October 2015, helping push deliveries to a 26th straight annual record last year. The levy has been raised to 7.5 percent this year. Auto sales rose 6.3 percent in the first two months of 2017, according to China Association of Automobile Manufacturers.

Carmakers and dealers are at odds over the need for government measures to boost vehicle deliveries in rural areas. Rising sales in January and February surprised analysts who expected weak demand in the wake of the tax increase.

The government regards the auto industry as a pillar of the Chinese economy and uses stimulus measures to spur its growth. In 2009 and 2010, China offered incentives to rural residents to buy cars.

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