(Yicai Global) May 27 -- Shenzhen has become the first first-tier Chinese city to subsidize the purchase of new energy vehicles. If used in conjunction with other discounts being offered by the provincial government and the city’s own district governments, the stimulus measures could have a big effect on boosting auto sales as demand stalls amid the resurgence of Covid-19 in the country, a car dealer told Yicai Global.

Buyers can get a maximum of CNY10,000 (USD1,484) off an electric car that is licensed in Shenzhen, the municipal government said yesterday.

Several districts in the city are already offering financial assistance on NEV purchases. Nanshang district’s is the highest, also at CNY10,000. In addition, southern Guangdong province, where Shenzhen is located, has introduced a discount of CNY8,000 (USD1,187) per auto. 

A new energy BYD car normally priced at between CNY100,000 (USD14,840) and CNY200,000 was already marked down by as much as CNY18,000 (USD2,670) before the city government’s grant was announced, a car salesman in Shenzhen told Yicai Global.

It is not clear if the Shenzhen government’s discount can be applied together with the other two price cuts, but if it can, it will prove a huge draw to potential buyers, he added.

The central government is also likely to roll out more stimulus measures. Earlier this week, the country’s cabinet already said it will introduce phased tax cuts on vehicle purchases amounting to CNY60 billion (USD9 billion). At present, China only taxes the purchase of fossil fuel-powered cars, which is currently set at 10 percent. NEVs have been exempt since 2014, although this waiver is due to expire at year end.

Shenzhen is also hiking the sales cap on fossil fuel-powered cars to 100,000 vehicles a year from 80,000 units. Many large Chinese cities limit the number of new cars added to their roads each year to relieve congestion and reduce emissions.

Several other regions in China have brought out their own car subsidies recently which has had a noticeable impact on consumer confidence, Sun Shaojun, founder of vehicle sales platform Car Fans, told Yicai Global. Since the third week of May, footfall at auto dealerships across the country has picked up.

As of May 22, China’s car shipments jumped 34 percent in the month from the same period in April to 780,000 units, according to data from the China Passenger Car Association. This was still a 16 percent slump from a year ago, but a narrowing of 22 percentage points from April’s slide.

Editors: Tang Shihua, Kim Taylor