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1.6L is one of the hottest topics in China auto industry. Some believe from end of this year government will not continue the policy for cutting 50% car purchase tax for models below 1.6L. Customers’ passion for small cars recently seems made an evidence for the rumor.
No doubt the policy in 2009 is a major driving force for the whole market. In case the stimulus policy calls off some day, it will impact the customers’ purchase intention.
But the question is “How much the models will suffer due to policy calling off”.
Take this question some reporters visited dealers and customers in Beijing to see some samples of market response.
1.6L is an ideal displacement for most customers.
New Volkswagen Bora is a strategic compact car by FAW-Volkswagen in 2009. Ever since its market launch, the facelift Bora sold very good by average 13,000 units a month. 1.6L models of new Bora were covered by the stimulus policy and it is one of the major reasons for the good performance, both dealers and automakers believe.
Mr. Zhang likes new Bora very much and when asked if he is going to buy it before the end of the policy, he gave us his own idea. “If I need a car, I don’t care about pay 5% more purchase tax, I won’t delay or in advance to buy just because of tax. I am now making decision and dealer’s discount interests me much more.”
Mr. Gao has his idea as well. “We can not be blind when making a decision such as buying a car. It’s not a small case for a normal Chinese family. I won’t rush into the show room and make an order just because the stimulus policy is going to end. Maybe there is better policy next year. Who knows?”
Dealers also have their ideas about the issue. A sales manager from a FAW-Volkswagen told reporter his idea. “The auto market in China goes very fast but in a reasonable rate. Under such an environment groups for each model is stable and the policy for specific model is also reasonable. If people buy cars just because of policy it’s no good for the industry in a long run.”
GCA: Policy calling off can not impact the small car segments.
1.6L is a golden displacement for Chinese family cars. Not because the displacement covered by the government stimulus policy, but the natural demand for these cars. In China most of the cars only used in crowed cities. 1.6L is a perfect balance point of enough power and fuel consumption for most families. This is the real reason why Chinese like 1.6L cars.
Once the policy called off some customers originally have intention for 1.4L or lower cars may shift their attention to 1.6L models. Besides, customer is not the only side to burden the tax. Once this happens, automakers definitely will offer more discount to dealers in order to keep customer price stable and then maintain the sales of the mainstream models. For sure the negative impact will happen, but not too much.
What GCA believes is that the auto market of China is never driven by policy but the huge demand. This time, as well.

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