Potential car buyers in China are delaying their purchases until a proposed new tax cut is passed, hurting dealers' sales in what is traditionally the busiest season of the year.

The National Passenger Car Information Exchange Association (NPCIEA) proposed the tax cuts in mid-December. NPCIEA said the proposal is now under discussion by the government and is likely to take effect soon.

More than 90 percent of the 10,000 respondents to an online survey by Sinotrust, a leading automobile industry research company, said they would not purchase vehicles before the tax cut.

The current car purchase tax is 10 percent regardless of engine size. The proposed new tax will trim 1 to 8 percent off the rates for vehicles with engines no bigger than four liters. In addition, "the government is considering canceling the purchase tax of passenger cars with engines smaller than 1.6 liters", said Wang Chuanfu, president of BYD automobile.

"The new scheme, if passed, will especially benefit manufacturers of small cars, which account for 30 percent of total sales," said Sun Muzi, an automobile industry analyst of Essence Securities.

According to the Sinotrust survey, 77.6 percent of the respondents said they would switch to buying small cars to benefit from the proposed tax concession.

Many customers who have purchased cars recently are asking for delivery postponement.

"Those consumers hope to take their vehicles after the purchase tax is reduced so they can save some money," explained Hao Wei, deputy general manager of a 4S (sale, spare parts, service and survey) Hyundai store.

(China Daily January 9, 2009)