China to cancel subsidy on vehicles with low-displacement engines

In March of 2009, China implemented a policy to subsidize the purchase of vehicles with engines displacing 1.6 liters or less and that consume fuel at a rate of at least 20 percent below the average auto sold in China. The policy slashed taxes on vehicles with low-displacement mills and effectively awarded automakers 3,000 yuan ($451 U.S. at the current exchange rate) for each eligible vehicle built. In 2010, changes to the policy slightly reduced the amount of the incentive.

China's tax break program on low-displacement vehicles is set to expire at the end of this month and its government and other responsible officials see no need to renew it. Secretary of the China Association of Automobile Manufacturers, Zhang Boshun, was quoted by the China Car Times, saying:

With this year's taxes being lowered, there has not been a massive effect on small car sales. The taxes were originally lowered as a way to combat the global financial crisis, while now the Chinese auto market is growing much stronger and shows that the mission has been accomplished.

China's additional incentive programs, which award buyers up to $8,800 for electric vehicles and $7,300 for plug-in hybrids will continue unchanged.

[Source: Gasgoo]