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Industry News

The Amount of Subsidies of Auto¡± trade-in¡± Policy Tends to be Increased

Source: Beijing Business News, by Lan Zhaohui Author£ºadmin Hits£º9539 Time£º2009/11/25 11:35:43
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As is understood, the implementation of the new Measures will greatly enhance the elimination rate of old and high-emission vehicles and promote the sales of new vehicles to achieve the purpose of energy-saving and emission reduction.  

Having been in effect for 3 months, the Implementation measures of Auto Trade-in (hereinafter referred to as the Measures), the market effect feedback of which is not obvious, is facing a new adjustment. yesterday, Luo Lei, vice general secretary of China Automobile Dealers Association, disclosed to the journalists that related departments are taking time to research and improve the relevant policies and increasing the subsidy standard. The new Measures will be introduced recently.  

Trade-in profits less than selling for dealers. 

With the coming of the second-hand vehicles trading season, I, having visited some 4S stores and second-hand vehicles markets, found that not only the 4S stores but also the second-hand vehicles markets were all flourishing. Customers who came to select or appreciate vehicles were much more than usual, so was the number of the dealings. However, when being asked about the number of the dealings enjoying the trade-in subsidy, the market participants answered that there were more inquiry but less trade-in.      

“In fact, there are only a few old cars enjoying the trade-in subsidy, therefore many car owners quit going on after inquiry. ” said one of the used car recycling staff helplessly,” Since the beginning of trade-in, we have got many inquiry, mainly about the range of trade-in vehicles, the amount of subsidy. There are more inquiry, but the application for trade-in is still less. “

Trade-in is a new preferential policy to promote the car replacement, while the consumers are not interested in it. A high-emission car owner told me that he decided to sell his car as a second-hand one after inquiring about the operation mode and amount of subsidy.

An anonymous dealers explained to me,” Taking an used Fukang as example, if it were traded in the second-hand vehicle market, it could be sold at £¤20,000 at least . But if it were eliminated, it could be paid back £¤4,000 at most, plus £¤6,000 of subsidy. I would sell it rather than trade in.”

As is understood, using the way of trade-in, including the income of scrapping used car and trade-in subsidy, the car owner will suffer a loss of several thousand yuan compared to selling it as a second-hand car. Besides the small amount of the subsidy, the regulation that the owner of the new car traded in must be the owner of the used car also influences some car owners` intention to trade in.

Only a few models on the market enjoy the subsidy.

In fact, the amount of trade-in subsidy has been renewed for several times. On March the 20th, the total amount of subsidy of scrapping the used cars was raised from £¤600million in 2008 to £¤1 billion, which was raised to £¤5 billion by the Central Finance at the Executive Meeting of the State Council. 

After the introduction of related detailed subsidy regulations of applying and receiving in various regions, the acceptation of trade-in application was formally started in Beijing on August the 24th. But compared with the trade-in of household appliances, which was started at almost the same time, the result of car trade-in was not obvious. 

According to the statistics shown on the official website of the Ministry of Commerce, by September the 25th, 113 thousand used household appliances had been called back and 64 thousand new ones had been sold, the sales of which reached £¤240 million,  since August the 10th when the trade-in of household appliances was started in Beijing. The sales in the 3 major home appliance chain stores of Dazhong, Gome and Suing increased by 30%.   

Wang Meng, director of Beijing Second-hand motors market, said that because the municipal government of Beijing had given clear notice in early days and taken measures to limit the running of high-emission cars, the proportion of high-emission cars on Beijing second-hand motor market decreased to less than 3%, and a lot of car owners had sold their cars or directly traded in a new one in 4S store when the cars were still in a good condition, so only a few enjoyed the subsidy of scrapping used cars. 

Xu Changming, vice director of Information Resources Development Department of the State Information Centre, said that the effect of automobile trade-in was relative weaker than several other incentive policies and from a market point of view to sell a used car would make much more than to scrap it to get the retirement income and subsidy, not to mention the over-elaborate procedures, so it was normal that the car trade-in was not welcomed at the market. 

Raising subsidy is necessary.

Experts of the industry commonly agree that if the Commerce Department tends to raise the amount of trade-in subsidy, the amount cannot be equal to the price at which the consumers sell at the market but more than it, which is the only way to raise the enthusiasm of the general public on used car trade-in.

But, as is disclosed by people in the know, even though the core of the adjustment of the Measure is to raise the subsidy, the extent has not been decided and many details are still on the secret list, and even it is likely to be postponed. 

As is believed by them, from the view point of American market, car trade-in stimulated consumption very obviously. According to American subsidy standard, the amount of subsidy of scrapping used cars is equal to the price at which a second-hand car is sold. That the amount of subsidy is not attractive to consumers mainly results from the discount of the same policy when being carried out in China.   

Luo Lei stated,” The new amount of subsidy will be enough to attract the consumers to choose car scrapping and replacing. Simply speaking, the subsidy makes it is more worthwhile to scrap and replace a used car than sell it as a second-hand one.”