China's car tax unlikely to impact environment

A new Chinese tax on luxury cars - imposed in an effort to cut pollution - takes effect next weekend, but analysts say it should have little impact on either the environment or car sales. Sport utility vehicles and oversized luxury cars such as the Mercedes-Benz S600 make up a small share of China's total vehicle sales, said Yale Zhang, an auto analyst for CSM Worldwide. And buyers usually are wealthy drivers or the government.

"These consumers don't really care about the prices," Zhang said. Under the new system, cars will be taxed at 3 to 20 percent, depending on engine size, according to the Finance Ministry. According to Zhang, Chinese dealers sold more than 3 million vehicles last year, but just 3,000 of them had engines of at least four liters - the target for the maximum tax.

Taxes on smaller cars won't change. The price Ford Motor Co.'s imported 5.4-liter Lincoln Navigator will rise by 12 percent to about $102,000, according to Kenneth Hsu, spokesman for Ford's China arm.

China is the world's second-largest oil consumer and has made improved energy efficiency a key goal in its latest five-year economic plan. The government says it wants to cut energy consumption per unit of economic output by 20 percent. But the car tax is unlikely to affect energy efficiency if it doesn't change buying patterns, Zhang said.

A more effective way to cut emissions would be to link the tax rate to a car's fuel efficiency, said Dongquan He, a Beijing-based program officer of the Energy Foundation Transportation Program Office, a non-governmental organization. Both He and Zhang said a planned fuel tax would do more to trim energy use. Xie Xuren, director of the State Administration of Taxation, said this month that China hasn't decided on when to roll out the fuel tax, mainly due to high global oil prices.