Nov. 4, 2009 (The Yomiuri Shimbun) -- Tax breaks and subsidies on the purchase of eco-friendly cars after scrapping old vehicles are boosting sales of not only hybrid cars, but also fuel-efficient gasoline-engined models.
Due to the impact of the tax break in promoting the sales of new cars, automakers have been working to improve the fuel efficiency of their gasoline vehicles to ensure they qualify for the tax-reduction scheme.
In August, Toyota Motor Corp. (NYSE:TM) improved the fuel efficiency of some models of its Vitz subcompact car. As a result, it qualified for a purchase and weight tax reduction of 75 percent, up from the 50 percent it could previously claim. Sales of Vitz climbed steeply to 12,731 in September, a 27.7 percent rise on the same month last year.
Tax breaks for eco-friendly cars were introduced in April, with a spring 2012 time limit set for the scheme. Under the scheme, consumers who buy new electric, hybrid and clean diesel cars are exempted from automobile acquisition and weight taxes. But gasoline-fueled car buyers also are entitled to a 50 percent to 75 percent tax reduction on cars that meet certain fuel efficiency and emissions criteria. When a car owner scraps a vehicle that was first registered more than 13 years ago and purchases an eco-friendly car that meets certain criteria, he or she receives a subsidy of 250,000 yen if scrapping a family car--including a midsize and subcompact car--and a subsidy of 125,000 yen if scrapping a microcar. The subsidy scheme is set to expire on March 31.
Some Vitz models do not qualify for the tax-reduction scheme. However, for the models that qualify for a 50 percent or 75 percent tax reduction, car buyers can save between 59,900 yen and 90,000 yen in acquisition and weight taxes. It gives consumers an incentive to choose certain Vitz models rather than other gasoline-engined cars that do not qualify for the tax break.
Toyota is now expanding its lineup of models covered by the tax-cut program through an improvement in the fuel efficiency of certain cars. Currently, 10 Toyota models, including some cars in the Vitz range, are subject to a 75 percent tax reduction, and 14 models, including its luxury midsize Mark X sedan, are subject to 50 percent tax reduction.
Nissan Motor Co. also is working to improve the fuel efficiency of its gasoline-engined cars. Currently, 17 Nissan models qualify for the tax breaks.
The tax breaks on eco-friendly cars are set to continue for more than two more years. Observers point out it that will become standard practice for automakers to increase the lineup of cars eligible for tax breaks, which will result in better choice and cheaper prices for consumers.
