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Scrapping subsidy little more than a shot in the arm

The 2012 voluntary scrapping subsidy for commercial vehicles (see story on p. 6) is little more than a shot in the arm, as demand for buses and trucks remains weak due to the slowed national economy and an overall slumping market.

According to statistics from China Highway and Transportation Society, China’s 50 top bus makers sold 18,700 units in May, further slowing down in growth from April. Almost half of the bus makers experienced sales decline. Three smaller bus companies, including Hebei Changlu Bus, stopped production in May.

Truck and bus owners have witnessed shrinking customer demand since the year’s beginning and many of them are reluctant to trade in their eligible vehicles despite government subsidies.

The subsidy amount is less than the price of a used vehicle. Most truckers and bus owners would rather sell their vehicles than trade them in for less value.

While the new subsidy policy may attract some private vehicle owners in mid-level and small cities to trade in their vehicles, it has little effect on city bus fleets. City officials are less influenced by the scrapping subsidy than the overall municipal planning needs. Most state-owned public transportation companies may not give a rap to the insignificant subsidy amount of ¥18,000 ($2,857).

Compared with last year’s subsidy of ¥18,000, the subsidy for buses less than 6 meters in length has been reduced to only ¥11,000 per vehicle this year. This may affect funding for some bus makers that have made manufacturing plans based on last year’s government subsidy level.

The 2012 voluntary scrapping subsidies are unlikely to help boost market demand for commercial vehicles. Manufacturers and consumers alike are waiting to see if the government would boost infrastructure spending in any significant way in the second half of the year to jack up market demand.

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