Despite the Chinese Communist Party’s ongoing subsidies for car purchases this year, the mainland automobile market experienced a significant decline in the first quarter. Cui Dongshu, Secretary-General of the China Passenger Car Association, publicly stated at a car forum that short-term subsidies cannot support the automotive industry in the future. He proposed implementing long-term policies, such as including vehicle expenses as a special deduction in personal income tax, which could shorten the car replacement cycle and stimulate car consumption.
The “High-Level Forum on the Development of Smart Electric Vehicles” was held in Beijing on April 11-12, where Cui Dongshu made the aforementioned call during his speech.
The China Association of Automobile Manufacturers announced on April 10 that in the first quarter, China’s mainland automobile production was 7.039 million vehicles, a 6.9% decrease compared to the same period last year, while car sales were 7.048 million vehicles, a 5.6% year-on-year decline.
On April 9, the China Automobile Dealers Association’s Passenger Car Market Research Branch (Passenger Car Association) reported that retail sales of passenger cars in the first quarter were 4.226 million vehicles, a 17.4% decline compared to the same period last year, with sales reduced by 890,000 vehicles.
Addressing the current market situation, Cui Dongshu emphasized that policies should shift from short-term stimuli to long-term structural development mechanisms.
He pointed out that future policies should provide more support for stable growth, relying not only on short-term policies but also on long-term policy support. For example, this year’s (subsidies for old car trade-ins) amounted to 200 billion, 300 billion last year, and possibly 150 billion next year. Short-term policies like these are difficult to sustain the long-term stable development of the industry.
Cui Dongshu proposed that vehicle expenses should be included in special deductions for individual income tax. For higher-income groups, they may deduct 30% of the income tax. For instance, if someone buys a luxury car for 1 million yuan, they could save tens of thousands of yuan in taxes. This could potentially shorten the car replacement cycle from 7 years to 5 years, thereby boosting car consumption ahead of time.
Furthermore, Cui Dongshu suggested that in the future, multi-child families should be provided with a guaranteed support policy for trading in old cars, offering subsidies for purchasing cars, especially for large and high-end models which have a higher price and a stronger consumption-boosting effect, needing more support.
On October 23, 2023, Cui Dongshu posted on his personal WeChat account, stating that 150 million people in China have a driver’s license but no car. He mentioned that compared to markets in developed countries, the proportion of used car transactions in China is relatively low.
It is worth noting that some individuals may own more than one car, so the actual number of people with a driver’s license but no car could be even greater.
Many netizens commented that the reason for having a driver’s license but no car is likely due to affordability constraints.
Others stated that the average income in China is still lower than in Europe and the United States, and for many Chinese families, a car is still considered a “major purchase” as opposed to being a “quasi-necessity” like in the United States.