The car industry is important for China. Around 40 million people depend on this industry. Under normal conditions, new car sales in China should now reach 6 million, but in the first quarter of 2020, car sales fell 42%.
The automotive sector accounts for 10% of China’s manufacturing output and provides revenues of US $ 1 trillion annually. China has even become a big market for the world’s automotive companies such as Volkswagen and General Motors (GM).
China now faces a new problem after the Covid-19 corona virus is resolved, how to increase sales of new cars. So far the chosen method offers some cash to residents to buy a new car.
According to data from the China Association of Automobile Manufacturers (CAAM) in February sales even dropped by 79%, new car sales were only 310,000. Last month there were 1.43 million vehicles sold.
“While supply chain disruptions due to corona are clearly making car manufacturers dizzy, sluggish demand could threaten the lot of people after two years of sales fell,” wrote Alicia Garcia-Herrero, Chief Economist of Asia Pacific at Natixis, as reported by CNN International, Monday (4/27/2020).
To increase this demand, China announced it would extend subsidies and tax breaks for renewable energy vehicles such as electric hybrid cars for the next two years.
Encouraging this sector to grow back as before is important. But re-creating consumer demand is not an easy matter either. Vehicle demand has fallen 8% in 2019, in 2018 sales also fell 3%.
more than 12 Chinese local governments have also taken steps to rescue them by providing cash subsidies for the purchase of new cars. The amount is US $ 1,400 or the equivalent of Rp. 21.7 million per vehicle.