Thread: Every farmer in China wants a new vehicle, all 800 million of them

March 19 (Bloomberg) -- General Motors Corp. can thank U.S. taxpayers for $13.4 billion in loans that have kept it running. The carmaker can also thank China’s government, which is kicking in subsidies of as much as $1,170 to help it sell vans.

The automaker’s China minivan venture boosted sales 32 percent in the first two months after a cut in retail taxes on small vehicles. The government is now giving out 5 billion yuan ($731 million) in subsidies to spur auto sales in rural areas.

GM doubled its 2009 forecast for China’s market growth as the tax cuts and subsidies revived demand, helping the country pass the U.S. as the world’s largest auto market so far this year. By contrast, the Detroit-based carmaker’s domestic sales have plunged 51 percent, forcing it to seek as much as $16.6 billion more in government aid.

“Every farmer in China wants a new vehicle, all 800 million of them,” said Yale Zhang, a consultant at CSM Asia in Shanghai. “It looks like the government wants to make that happen.”

The auto subsidies fit into China’s wider push to help spread economic growth into rural areas, heavily dependent on agriculture. The rural areas are home to about half of the country’s 1.3 billion people. They are also in line with China’s 4 trillion yuan stimulus plan designed to help revive the economy by spurring domestic consumption.

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