Stock Prices Rise as China Ponders Tax Cut for Cars

Stock prices for carmakers worldwide are climbing on news that China’s central government may again lower its new-car purchase tax to stimulate sales, Bloomberg News reports.

China’s National Development and Reform Commission has submitted a plan to lower its new-car purchase tax to 5% from 10%, but no decision has been made, according to the news service.

The scheme would apply to vehicles equipped with engines that displace no more than 1.6 liters. That category covers about 70% of all passenger cars sold in China, according to the China Assn. of Automobile Manufacturers.

China implemented the same plan in 2009 and 2015 to revive demand for new cars. In those cases, sales surged 50% and 16%, respectively, before the government gradually restored the 10% tax rate. Both programs pulled ahead sales and caused a sales slump when the incentives ended.