Auto Stocks Gain As China Proposes 50% Cut In Car Purchase Tax

Shares of major Indian automakers rallied in morning trade today amid reports that China was considering reducing its vehicle sales tax to increase demand. A Bloomberg report said that the Chinese regulator proposed cutting its car purchase tax by half in order to support the key industry that has been hurt by the ongoing trade war with the US.

After the Bloomberg News report, stocks of the Chinese markers like Great Wall Motor Co., Geely Automobile Holdings Ltd., and Guangzhou Automobile Group Co. rose as much as 6.9 percent, 6 percent, and 4.4 percent respectively in Hong Kong Stock Exchange on Tuesday. Back in India, Tata Motors, Mahindra & Mahindra, Ashok Leyland, Motherson Sumi, and Maruti Suzuki gained, reflecting the movement in China.

The move is expected to benefit the world's largest automotive market that is facing its first decline in over two decades due to the bruised consumer spending power from the trade war. Volkswagen AG, BMW AC, Daimler AG also rose in Frankfurt trading while Ford Motors Co and General Motors gained in the US on Monday.

In order to control the slowdown of growth in the industry, China's top economic planning body proposed to reduce the tax on car purchases by half to 5 percent and this would apply to cars with engines not bigger than 1.6 litres, as per the Bloomberg report, citing unnamed sources.