China looking to reignite struggling auto industry

Company News

by Glenn Dyer

China has outlined a new set of steps to boost consumer demand for cars, but not electric vehicles just yet.

While the government said Thursday that it would consider extending a key tax break for electric vehicles and plans to remove some restrictions on second-hand car sales, there was no policy pronouncements on what the Chinese call NEVs (New Energy Vehicles).

Moves to extend the purchase tax suspension for NEVs past the planned end of December 31 were floated in June by a government minister.

China’s Ministry of Commerce made the announcement as part of a joint statement with 16 other departments including the finance and industry ministries.

As part of the new efforts in the wake of the damage done to car sales by the lockdowns across the country, especially in Shanghai and Beijing in April, May and June, authorities last month halved the auto purchase tax to 5% for cars priced under 300,000 yuan ($US45,000) with 2.0-litre or smaller engines.

These are conventionally powered vehicles, not NEVs which for the moment are covered by the purchase-tax suspension until the end of this year.

Buyers of fully electric and partly electric vehicles (NEVs, or New Energy Vehicles such as B-HEVs and P-HEVs) have not had to pay the purchase tax since 2014.

A plan to reinstate it next year may now be scrapped, the Commerce ministry said, confirming a stance first flagged last month by the country’s cabinet.

Reuters reported in May that authorities were talks with automakers about extending the program.

The commerce ministry also said it would encourage the replacement of older cars and increase credit support for car purchases.


The underlining strength of support for lithium has emerged in the $US1.7 billion capital raising and secondary listing by Chinese group Tianqi in Hong Kong on Wednesday.

Tianqi is a major player in the Australian lithium sector with investments in a mine, refinery and contracts with would be and actual producers such as IGO.

The company sold 164 million shares at roughly $HK82 ($US10.45) apiece, pricing at the top of an expected range with demand coming predominantly from existing shareholders and not locals.

Cornerstone investors invested, according to local brokers including LG Chem, South Korea’s largest diversified chemical company, and the state-owned China Aviation Lithium Battery Co, a supplier for homegrown electric carmakers such as Xpeng and Geely.

Tianqi Lithium’s share sale was oversubscribed in the end because of the take up by existing investors.

The listing is the biggest in Hong Kong this year, roughly tripling the $US544 million secondary float in January of JL Mag Rare-Earth.

Tianqi’s secondary listing is part of the latest fundraising rush of Chinese electric vehicle battery and material companies as the country moves to protect its dominance over global battery and EV supply chains.

Tianqi sold a 49% stake in its Australian unit in 2020 to IGO for $US1.4 billion to help repay an acquisition loan.

The Kwinana lithium refinery near Perth, Australia — a joint venture between the company and IGO and the first lithium refinery outside China — delivered its first batch of battery-grade lithium hydroxide in May and the first train will be producing by later this year.

Tianqi Lithium’s offering priced the company’s Hong Kong shares at a 50% discount to price of the shares on the Shenzhen stockmarket.

Tianqi Lithium’s trading debut is scheduled for July 13.


And finally, more data from China confirms that Tesla remained the number one pure eV maker in the country and globally for the month of June.

Preliminary estimates from the China Passenger Car Association showed Tesla sold around 78,000 vehicles manufactured in China in June.

The June total represented a 142% jump from May, when Tesla sold 32,165 China-made vehicles, and was up 135% from a year ago.

Tesla’s June quarter production was hurt by lockdowns that closed the car maker’s Shanghai plant for most of April.

Tesla sales figure was ahead of the 69,544 EVs (or BEVs, Battery Electric Vehicles) sold by Chinese giant, BYD which also sold 64,218 PHEVs (or a Plug-in Electric Vehicle) which is not a pure EV.

Meanwhile Some 1.92 million passenger cars were sold via retail channels in China in June, up 22% from a year ago and 42% from May as car making plans returned to capacity as Covid lockdowns and other restrictions eased.

The China Passenger Car Association said preliminary data showed that total sales of passenger vehicles rose 37% to 2.11 million units last month, with NEV sales estimated at just under half a million.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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