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Chinese Govt To Hike Up Gas Prices?

In 2018 China Car Times was acquired by Autowise. This article originally appeared on ChinaCarTimes.com.

Chinese oil tax to push prices all the way up to 7rmb or more per litre? We at China Car Times surely hope not! That would have a HUGE effect on the Chinese economy, we hope the draft does not come reality. Click continue reading to see more:

ZHANG Xiao, a 26-year-old new-car owner, kept a close eye on this years national legislature conference in Beijing last week where a possible announcement on a new fuel tax could have increased the amount he spends on his car each month.

He had just bought a Chevrolet Lova compact car for 100,000 yuan (US$12,900) on which he spends 500 yuan a month for gasoline.

I could have accepted a 50 percent increase in the oil price due to the fuel tax, but if the rate had doubled as some media reports said, then I would not be able to afford to drive in Shanghai, the financial manager of a private entertainment agency said.

In the end, the fuel tax, which will be collected through an increase in the gasoline price, was not mentioned.

However, the government still plans to introduce the tax to improve energy efficiency and protect the environment.

The tax also could push auto buyers into buying smaller-engined vehicles and help restructure Chinas auto industry for sounder development.

Jin Renqing, the governor of the Ministry of Finance, said at the National Peoples Congress last week, China will introduce the fuel tax as soon as possible and hopes to finalize the policy this year. Its just about waiting for the right time.

Some other representatives called on the government to launch the tax at a faster pace to ease tight supplies of energy as well as boost the use of smaller cars in China.

Those remarks caused market speculation that the long-awaited policy would be introduced soon because the worlds second-largest auto market is paying more attention to energy conservation as its vehicle population booms.

According to the latest draft, the new fuel tax policy includes an estimated 30 percent increase in the current oil price to between 5.5 yuan to 7.5 yuan a liter.

But government concern over a higher oil price is not the only reason the tax has not yet gone into effect.

The fuel tax will also replace several other transportation fees including the purchase tax and tolls for bridges and most expressways. This will reduce the tax incomes of local governments and cause estimated job losses of more than 200,000.

However, while the government is worried the extra costs incurred by the fuel tax will cool down the auto market – one of the most important driving forces for sustained domestic consumption in the country – analysts and car makers are optimistic about the taxs impact.

The increase in the oil price will dampen peoples purchasing desire in the short term, said Yan Ruilin, chief analyst of Shanghai Xiangtong Auto Consulting Co Ltd.

But the market rule is that Chinas auto industry will continue to maintain a relatively aggressive growth with its rapidly growing economy amid the low vehicle population.

Zhang Boshun, secretary of the market commission of the China Association of Automobile Manufacturers, echoed this view.

The fuel tax will have a positive impact on sales of smaller cars. It could further help to prompt car makers to change their product line-ups to meet customer needs and restructure the industry, Zhang said.

Zhu Yanfeng, general manager of First Automotive Works Group, the nations second-largest car maker, said the fuel tax would put pressure on car makers to improve their technology, according to China Automotive News, an auto newspaper affiliated to Peoples Daily.

Overseas car makers are also keen to take advantage.

Japans Daitahsu Motor Corp, a specialist in making small cars under Toyota Motor Corp, said it would starting selling its models in China this year.

Last year, more than 25 small-engined vehicles hit the Chinese market including GMs Lova, PSA Peugeot Citroens Peugeot 206, Volkswagens revamped Polo and Hyundai Motor Corps Accent.

Changan Group, Chinas third-largest auto maker, sold nearly 500,000 units of small-engined models, accounting for nearly two-thirds of its total sales.

It plans to invest three billion yuan over the next few years to quicken its pace in developing more small cars.

The average 10 percent growth in gross domestic product is increasing income in China where there are 30 cars for every 1,000 people compared with 120 in the United States.

Last year, passenger car sales surged more than 30 percent to 4.5 million units, helping the nation become the second-largest auto market in the world.

The sales forecast has lifted to eight million for this year in China and analysts say sales will further extend in 2009.

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Chris Riley
About Chris Riley

I have been wrecking cars for as long as I've been driving them but I keep coming back for more. Two wheels or four, I'm all in. GearHeads.org gives me a chance to give something back to the automobile community.

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