China To Cut Taxes On New Cars

China is the largest automobile market in the world both in terms of demand and supply with over 25 million passenger cars and about 4 million commercial vehicles manufactured last year. However, with the on-going trade war with the United States greatly affecting China and the stock markets around the world in general, one of the key changes is the reduction in demand for new cars in China, a first in nearly two decades! According to a report by Bloomberg, the Chinese market has seen a slowdown in new car sales in the last few months and in order to boost the market, the regulators have decided to cut the taxes on new cars by 50 per cent!

China currently levies a 'car purchase tax' on new cars at 10 per cent, which after the tax cut will be reduced to 5 per cent. This will make cars more affordable although will only be applicable on cars whose engines are smaller than 1.6-litres. Interestingly, almost 70 per cent of all cars sold in China fall under this category. Amidst the on-going trade war, China had increased taxes on American made cars to a whopping 40 per cent while other imported cars from other regions of the world are taxed at 15 per cent.

China is the biggest market in the world for brands like Volkswagen. The VW group sold about 40 per cent of all its cars globally in China last year and the same stands true for other brands from Europe too. Ford also sells a massive chunk of its cars in China and the leaked announcement immediately spiked Ford share prices on the New York Stock Exchange