China Raises Taxes on Big Cars (Up to 40%), Lowers Them on Small Cars (Down to 1%)

China Car Traffic photo

Trying to Fight Air Pollution
Only 4 months ago, we wrote about how big cars were the stars at the Beijing Auto Show. But now that air pollution is in the news more than ever because of the olympics, it seems like the Chinese government has had second thoughts: It decided to reduce taxes on small cars, and increase them on big vehicles. And they're not taking half-measures. The tax on some big vehicles can be as high as 40%.

China's Tax Scale is Based on Engine Size
Starting on September 1st, passenger vehicles with engines bigger than 4 liters will see their tax doubled to 40% from 20%. Engines with displacement from 2 liters to 4 liters will be taxed 25%, up from the current 15%, and cars with engines at or smaller than 1 liter would drop to 1% from the current 3%.

Air Pollution in China photo

Emission Standards

Via Detroit News:

The country's big cities have imposed auto emissions standards that exceed those in the U.S. and are at least equal to European levels. Shanghai has banned heavily polluting small motor scooters and limits access to its downtown areas by vehicles failing to meet clean air standards.

China is already the world's second biggest market for cars, and there's no doubt that it will become number 1. It's only a question of time.

Fuel Subisides in China
As we wrote about in a post titled Price Controls on Gasoline in Certain Asian Countries, China has some of the least expensive gasoline in Asia. Almost half of the prices in Hong Kong. Cutting these fuel subsidies, more than taxing vehicles, would probably have a bigger impact on what type of vehicles people want to buy and on air quality.

It will also be interesting to see if China can produce plug-in hybrids (like the BYD F6DM) and electric cars (like BYD's E6) inexpensively enough for its own population to buy them. This could help it leapfrog many western nations.

California Uses More Gasoline and Diesel than China
China's BYD to Sell Electric Cars and Plug-in Hybrids in Israel in 2009
BYD F6DM: Will the First Plug-In Hybrid be Chinese?
Price Controls on Gasoline in Certain Asian Countries
More on China Taxing Big Cars
China raises tax on big cars to cut pollution

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