Lifan Thailand

Chongqing government has begun subsidising car purchases in rural areas, an auto executive told Reuters, part of a renewed, targeted stimulus programme that could be expanded to other parts of China.

The move by the municipal area — home to some 30 million people in a region that includes densely urban areas as well as sprawling countryside — aimed to boost the outlook for Chongqing Changan Automobile Co and its peers, which have been struggling amid a market slowdown.

A source told Reuters last month that China plans to renew government subsidies for rural residents who trade in old vehicles for new, fuel-efficient ones, part of a $330 million stimulus plan to lift sales that dropped off sharply when earlier incentives were halted.From the beginning of June, rural residents of the region became eligible for handouts of up to 3,000 yuan ($470) for each locally made light vehicle with engine displacement of more than 1.6 litres, a Changan executive told Reuters.

Changan, a mini-van maker, is offering its own subsidies of up to 2,000 yuan for buyers of its vehicles, said the executive, adding the company would allocate 4 million-5 million yuan for the project.

Light trucks with loading capacity of no more than 6 tonnes would also be eligible for government subsidies.

Beijing introduced a series of stimuli in 2009, including tax incentives for small cars, in a move that helped China deflect the impact of the global financial crisis. In the process, the stimulus also helped propel China past the United States that year as the world’s largest auto market by volume.

China’s auto market slowed significantly in 2011 after the policies expired, with annual car sales climbing merely 5.2 percent, down from a 33 percent and 53 percent annual gains in 2010 and 2009, respectively.

Changan, a Ford Motor China partner, was badly bruised. Its net income slumped 79.7 percent to 7.54 billion yuan in the first quarter of 2012, extending a 52.4 percent fall in 2011.

Lifan Industry Group Co's Quarterly earnings also based in Chongqing, came to 93 million yuan, down 4.9 percent from a year earlier.