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China cuts tax to rev up small car sales

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Bob Moon: Meantime, the Chinese government is rolling out some new incentives for car buyers starting tomorrow. And since the Chinese buy brands from around the world, Detroit’s Big Three are watching closely. Marketplace’s Scott Tong reports from Shanghai.

Scott Tong: China’s stimulus package cuts the sales tax on little cars — those with engines 1.6 liters and below. Beijing wants to rev up the fuel-efficient market, and so do automakers like GM. They’re banking on emerging markets to offset losses elsewhere. Independent analyst Jia Xinguang:

Jia Xinguang: China is critical now. North America and Europe are hurting. So is Japan. The only markets that may grow right now are China, Brazil, India and Russia.

Two years ago, new-car sales in China zipped along at a 22 percent growth pace. That dropped off to seven last year; hence the stimulus. If it works, China’s potential is like that of the U.S. back in the ’50s. Here’s Michael Dunne of J.D. Power and Associates.

Michael Dunne: In China, 80 percent of the people who buy a car this year, will be buying a car for the first time in their lives.

But what brands will they pick? Once upon a time, GM and VW logos owned the streets of Shanghai and Beijing. But today, Toyota’s coming on. As are local brands aren’t the joke they once were. Alfred Tian edits China Automotive Review.

Alfred Tian: It’s very possible for Chinese automakers to overtake Volkswagen or GM or Toyota. It’s very possible.

And remember, this stimulus is to boost small vehicles — Detroit’s historic weakness. The Big Three want to do a “U-ie” in that neighborhood, starting with China. In the last month, both Ford and GM opened new plants here to build and sell pint-size cars.

In Shanghai I’m Scott Tong for Marketplace.

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