Some of China's auto manufacturers, hit by slower sales growth in their once-booming home market, are pushing the government to take steps to boost demand for cars, especially small ones.


The requests follow Beijing's announcement this month of a four trillion yuan ($586 billion) economic-stimulus package to fuel consumer spending and revive flagging growth amid the global economic downturn. Other Chinese industries are also seeking government assistance. The state-owned airlines, for example, have requested hundreds of millions of dollars in government funds to help them survive a continuing slump.

The Chinese car makers, many of which are at least partly government-owned, are asking for lower sales taxes on cars with smaller engines or more environmentally friendly technology, to stimulate purchases, auto executives said.

Despite the economic climate, passenger-car sales rebounded in October, rising 11% from a year earlier. But analysts caution against making too much of a single month's data, especially as it follows sales declines of about 6% in August, and about 2% in September. For the first 10 months of 2008 as a whole, sales grew about 10% -- robust, but far slower than last year's 21% rise or the 30% growth China's car market experienced in 2006.

To help car makers and consumers, analysts say, Beijing could move to lower state-set fuel prices now that world oil prices have declined sharply from their levels earlier this year. At least part of that reduction could be offset by a fuel tax to encourage purchases of more fuel-efficient cars. Chinese officials said no decision has been made yet.

High gasoline prices have discouraged many potential car buyers, auto makers say.


Chen Bin, director of the industry division of the National Development and Reform Commission, which sets China's industrial policy, said the government isn't looking at providing funding for auto makers. "What we can do is about market demand, to boost domestic demand," he said. Mr. Chen declined to discuss what specific measures the government is considering.

China's car industry as a whole remains healthy. According to figures collected by the Ministry of Industry and Information Technology, for the first eight months of 2008, combined profits at 19 of the country's biggest vehicle companies rose by 25% from a year earlier.

The downturn in car sales isn't affecting all auto makers equally. Chery Automobile Co., one of China's largest manufacturers, saw sales fall 40% in September from a year earlier, while its October sales slid 6%. But at BYD Auto Co., which recently introduced a new small car, September sales were nearly three times those of a year earlier. That could make government policy making more difficult.

So far, auto executives have said, companies have been asking for tax breaks that would help boost sales of cars with small engines, a part of the market where domestic manufacturers have been more competitive. China levies a tax of roughly 8.6% of a car's taxable price, which is calculated based on the retail price and the size of the engine, among other variables. Cars with larger engines are taxed more heavily.

"Sales of small cars have dropped significantly," said Jin Yibo, spokesman for Chery. "We think there's an urgent need for government support" to stimulate demand, he said.