(Yicai Global) July 4 -- China reduced a total of CNY7.1 billion (USD1.1 billion) in taxes in the first month of its preferential car purchase policy, with more than 1 million automobile buyers benefiting, according to the State Taxation Administration today.

Since its implementation on June 1, the policy has covered a total of 1.097 million passenger cars. Of the cars, the tax on passenger cars with a swept volume of 1.6 liters and below was cut by CNY3.4 billion, according to data disclosed by the STA to Yicai Global.

The tax on cars with displacement varying from 1.6 liters to 2.0 liters was slashed by CNY3.7 billion.

Under the policy, Between June 1 and December 31, China will impose a half-cut vehicle purchase tax on passenger cars priced at no more than CNY300,000 (USD44,790) and displacements below 2.0 liters. This means that the tax rate has been reduced from the current 10 percent to 5 percent.

The State Council, China’s cabinet, had previously pointed out that the scale of tax cuts under this policy will reach CNY60 billion.

Cui Dongshu, secretary-general of the China Passenger Car Association, earlier told Yicai Global that the policy was expected to bring another 2 million cars into the Chinese auto market this year, thus reversing the annual sales from the predicted 6 percent decline to an increase of 4 percent to 21 million cars.

And, the policy has already boosted the market.

According to the latest data disclosed by the CPCA, from June 1 to 26, retail sales of passenger cars in China hit 1.422 million units, a rise of 27 percent from a year earlier and an increase of 37 percent over the same period in May. In the first five months of this year, retail sales fell by 12.8 percent over the same period in 2021.

At an executive meeting held on June 22, the State Council announced that China will roll out more measures to support automobile consumption, involving second-hand cars, new energy vehicles as well as parallel imported vehicles. It is expected that relevant policies will raise automobile and related consumption by about CNY200 billion (USD30 billion) this year.

Editors: Dou Shicong, Peter Thomas