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China will take more steps to boost automobile demand by modifying the related policies and expanding the used car and auto leasing markets, said Premier Wen Jiabao.

Cars ready for departure at the Chang'an Motors Co Ltd factory in Chongqing. [Bloomsberg News]

"New growth areas of consumption will be fostered and developed. The second-hand vehicle and auto leasing markets would be standardized and rapidly developed," said Wen in the government work report speech he delivered at the opening of the second session of the 11th National People's Congress (NPC) yesterday in Beijing.

The premier said the government will also modify the related policies to guide and forge a healthy consumption pattern in the automobile market, one of the key sectors that would stimulate domestic demand and drive economic growth.

Moreover, "we will implement policies to reduce the vehicle purchase tax and subsidize rural residents' vehicles purchases to stabilize and increase consumer spending on cars and motorcycles," said the National Development and Reform Commission in its report on the implementation of the 2008 plan for national economic and social development at the NPC.

Shen Rong, vice-president of China Automobile Dealers Association (CADA), confirmed that it is now drafting a new standard for used vehicle appraisal and evaluation.

"The related government departments are doing research to modify the policy on the sector and establish a public information platform for used vehicles, in a way to standardize the market, and encourage the circulation of used cars," said Shen.

In January, China for the first time topped the US in automobile sales, after a series of industry and market support measures adopted by the government began to take effect.

Analysts said China's automobile market still lags the US market despite the better performance in sales volume. Used cars and automobile services are significant sectors.

"Sales of used cars make up only about one-third of the total number of cars sold in China, while the used car market is usually bigger than the new car market in developed nations," said Huang Yong, chief expert, China Automotive Technology and Research Center.

Currently, the sales of used cars in the US, Germany and Japan are 3.5, 2 and 1.4 times that of the new car market.

Last year, China traded 2.74 million of used vehicles, with a slight increase of 3 percent from 2007, the lowest growth in the recent years, according to CADA. It compared to total domestic automobile sales of 9.38 million units.

The trade revenue totaled 118 billion yuan, up 10.56 percent from the previous year, said the association.

However, "we are glad to see that among the used vehicles sold last year, passenger cars accounted for 1.43 million units, with a year-on-year growth of 10.17 percent, 7 percent higher than the total segment," said Shen of CADA.

Luo Lei, another official of CADA, predicted that the used car market would revive in the second-half.

(China Daily March 6, 2009)