Fri, Oct 23, 2009 page12

• Automakers call for extension of tax break

  HELPING HAND Supported by a tax cut for purchases of new cars, total sales should reach 270,000 vehicles this year, Capital Securities Corp analyst Angela Chuang said

  • By Kevin Chen / STAFF REPORTER
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  Local automakers have submitted a petition to the government asking that a commodity tax cut of NT$30,000 on car purchases be extended for another year to boost car sales, an official at the Taiwan Transportation Vehicle Manufacturers Association said yesterday.

  The tax cut, which took effect on Jan. 1 and expires on Dec. 31, has raised sales, with the latest government figures showing that 20,100 new vehicles were sold last month, up 20.3 percent year-on-year.

  It was the fourth straight month with sales of new cars above the 20,000 mark.

  “There is no question that the measure has succeeded in boosting auto sales,” Huang Wen-fan (黃文芳), a section chief at the Taipei-based vehicle association, said by telephone.

  JOBS

  Huang said it had also helped stabilize employment in the sector and improve the nation’s consumer sentiment.

  “A one-year extension of this measure will provide much-needed help for automakers and for all parties involved in this sector,” he said, citing autoparts suppliers, steel producers and other related businesses.

  The Ministry of Finance lowered the commodity tax on automobiles with engine displacement under 2,000cc by NT$30,000 and that on motorcycles with 150cc engines or smaller by NT$4,000 for one year.

  The vehicle association represents major auto companies that together employ approximately 300,000 people in Taiwan. These include Hotai Motor Co (和泰汽車), Yulon Nissan Motor Co (裕隆日產), China Motor Corp (中華汽車) and Ford Lio Ho Motor Co (福特六和).

  During the first nine months of the year, overall car sales rose 5.6 percent year-on-year to 192,264 vehicles, data from the Ministry of Transportation and Communications showed.

  Supported by the tax cut, total sales are expected to reach 270,000 units this year, Angela Chuang (莊慧君), an analyst who tracks steel and auto stocks at Capital Securities Corp (群益證券), said by phone.

  Her forecast was higher than the 229,495 vehicles sold last year but lower than total sales in 2007 (326,000 vehicles) and less than half of sales in 2005 (510,000), when the sector peaked.

  MINISTRIES

  Huang said the association met officials at the Ministry of Economic Affairs (MOEA) and the Ministry of Finance (MOF) last week.

  “The proposal for a one-year extension gained the MOEA’s support but was turned down by the MOF,” Huang said.

  “Total car sales would drop to 220,000 units next year without the government’s tax incentive,” he said.

  Minister of Finance Lee Sush-der (李述德) said last week he did not intend to extend the tax cut on car sales because the measure was intended as a short-term stimulus.

  It should not be repeated unless necessary, Lee said, adding that it would lose its effect if used too long.

  Although the measure boosted sales, it shrank state coffers by NT$8.5 billion (US$262 million) between January and August, cutting total commodity tax by 30 percent to NT$17.79 billion from a year earlier.

  Taiwan Ratings Corp (中華信評) credit analyst Frank Fan (范維康) said in a report in August that domestic car sales had fallen to a level where some automakers were forced to operate “uneconomically.”

  “The domestic operating environment is likely to become increasingly challenging for local automakers over the next one to two years as car buyers’ purchasing power continues to deteriorate until the economy shows signs of real improvement,” Fan said.

  ADDITIONAL REPORTING BY CRYSTAL HSU
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