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Back in 2009, the Chinese government agreed to slash sales tax on vehicles sporting engines that displace 1.6 liters or less. The decision, which halved sales tax from ten percent to five percent, should've spurred the purchase of fuel-efficient autos. Apparently, it didn't.

Chinese legislators have now strung together a different scheme. Effective January 1, 2012, vehicles sold in China will be taxed based on engine size. Xinhuanet reports that the draft of the law, which was approved by the government late last week, outlines a tax plan that will work like this:
Taxes on vehicles with engine capacities from 1.0 liter to 1.6 liters dropped from 360-660 ($55 to $100 U.S. at the currrent exchange rate) yuan to 300-540 yuan ($46 to $82 U.S.). Meanwhile, taxes on vehicles with engine capacities of 1.6 liters to 2.0 liters dropped from 660-960 yuan ($100 to $146 U.S.) to 360-660 yuan ($55 to $100 U.S.).
In China, some 87 percent of the cars on the roads are powered by engines with less than 2.0 liters of displacement. Under the nation's new program, this is a good thing, since large displacement mills will be subject to taxes that max out at 5,400 yuan ($821 U.S.). Will this be the program that finally spurs the purchase of fuel efficient vehicles over in China? More interestingly, would this sort of engine size-based tax system work in the U.S.?

[Source: Xinhuanet]


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  • 12 Comments
      • 4 Years Ago
      Engine displacement isn't a great way to do this. Fuel economy is a better idea.
        • 4 Years Ago
        Agreed. This is a dumb move. Engine displacement in HEV, PHEV and BEVs either cannot be interpreted correctly or does not make sense at all.
        Fuel economy would be definitely better and well-to-wheel environmental footprint would be the best (but very difficult to figure out).
        Tailpipe CO2 emission based tax in some EU countries is a reasonable compromise.
        • 4 Years Ago
        As I note below, the challenge with using a Fuel Economy metric is getting a "fair" repeatable and repeatable measurement system.

        CAFE is a very poor idea, as it doesn't appear to the Consumer, and relies on the OEM to implement. These taxes only work when they're in front of the customer, where the customer sees them at the time of purchase and has to factor them into their buying decision.

        The biggest fault in the system is capping the tax. If it's huge, let it pay!
        • 4 Years Ago
        Yeah, there is certainly a more sophisticated way to do it, a la CARB/CAFE/etc.

        But this is a step in the right direction. China is beginning to put their money where their mouth is.

        They'll figure it out. I think they are starting to get tired of wearing masks when they go outside.. lol
      • 4 Years Ago
      It seems that I get a better bang for my buck at 1.6l and up.

      Not the best way to encourage fuel economy.
      • 3 Years Ago
      Does the California Air Resources Board audit Partial Zero Emissions Vehicle (PZEV) warranty compliance?

      California motorists seem to be paying for repairs that the California Air Resources Board requires the car manufacturer to provide.
      harlanx6
      • 4 Years Ago
      Good idea. Apparently China isn't infested with lobbyists, so decisions can be made based on merit instead of graft.
        • 4 Years Ago
        @harlanx6
        I wouldn't quite go that far - China has serious issues with corruption and graft.

        What they don't have are the vast amounts of pseudo-science bullpuckey that we see over here. So corn-based Ethanol is a non-starter in China.

        In China, a lot of their top government positions are filled by technical / engineering types, rather than politcal appointments. It makes a pretty big difference. I see a lot of highly-practical "good enough" being done in China.
      • 4 Years Ago
      I think China's on the right path here.

      While taxing fuel economy on a per-car basis would be ideal, it requires a well-developed, uniform test regimen that produces consistently reproducible results that translate well to real-world usage. Even in the US, we don't really have that today, which is why things like PZEV stop/start don't count, and EREV vehicles like the Volt get measured in CS mode vs weighted against likely battery / gas usage.

      Recall that the ZDM is much more fragmented than the USDM or JDM, with vast numbers of carmarkers and cars on the road. Testing each car configuration prior to sale becomes a real problem, and ZDM oversight is such that it would be hard to "trust" the various OEMs to test and report properly.

      That said, given the relative lack of maturity in the ZDM, from both an OEM and government standpoint, engine size isn't a bad proxy for fuel economy given the simplicity of measurement and relative lack of potential gaming by the OEM. It's not like you'll have OEMs able to program their ATs for the ZDM mileage measurement.

      Yes, FI cars benefit from a loophole, treating them as "off-boost". Still, given the low speeds of most ZDM driving, it's not so bad.

      Hybrids & EVs come out very nicely here - the battery doesn't count as displacement. A Voltlike thing with a small generator, would be at the lowest level, and an EV wouldn't count at all. That's pretty green-friendly.

      All-in-all, it's not perfect, but it's simple, repeatable, and reliable. Good characteristics for any tax system.
        • 4 Years Ago
        Rating engines by displacement leads to unnecessary engine complexity. You can add an expensive gee-gaw that adds power without penalty, but a simple cheap displacement bump brings a tax, even of the displacement bump doesn't reduce economy.

        As a straightforward example, look at pushrod versus OHC. OHC adds size, complexity, cost, reduces efficiency (more spinning mass) but it reduces displacement, so it's selected for here. Turbos also are selected for, even when they don't increase fuel economy or reduce cost or engine size/mass.

        It's not a good idea.
        • 4 Years Ago
        Europe's carbon tax kinda works. But then you end up with diesel looking good ( so2, particulates, and NOx are no problem, right? ;) )

        the engine displacement tax will lead to motors like what Honda used to produce for Japan.. high compression, high power, high revving, low displacement... but bad bad NOx emissions O_O

        No cut and dry way to do it, but at least China is doing it.... finally..
        • 4 Years Ago
        @LS7 - China needs to start somewhere, and you can bet they've looked at the failed CAFE and impossible-to-implement Carbon proposals as how *not* to do it.

        Displacement is a Keep It Simple, Stupid approach that will bridge them for the next 5 to 10 years.