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China To Subsidize Farmers $732m For Clean Auto

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Shanghai, January 15, 2009: ( China approved a new set of tax cuts and subsidies yesterday to support the country's auto sector, said state media. The subsidies in the package include $732 million set aside for farmers to scrap high-emission vehicles for cleaner ones.

From Jan. 20 to the end of this year, the government will reduce the tax on purchases of cars with engines smaller than 1.6 liters to 5% from the current 10%. This policy is intended to boost the sluggish auto market and also to encourage the making and buying of energy-efficient, eco-friendly vehicles in China.

For the same purposes, the Chinese government plans to spend 5 billion yuan ($732 million) from March 1 until Dec. 31 on one-time subsidies to farmers opting to replace their high-emission vehicles, three-wheeled vehicles or outdated trucks with smaller, cleaner new ones driven by 1.3-liter or less engines.

China's auto sales grew 6.7% last year, the first time growth has fallen below 10 percent since 1999. The auto industry is looking to the vast countryside, which is getting more affluent but has lagged the consumer boom of the cities, for further growth in auto sales.

In the next three years the Chinese government will provide 10 billion yuan to automakers to help upgrade their technology and develop alternative energy vehicles, especially the clean electric vehicles.

The new support and subsidy measures appear to be part of a wider 4 trillion yuan ($586 billion) economic stimulus package China announced in November 2008.

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