Rural subsidy policy seems hard to pay off

China's finance ministry detailed the 5-billion-yuan ($732 million) subsidy plan for rural vehicle purchases last month. Under the plan, farmers who buy light trucks and minivans from March 1 to Dec 31 this year will get a 10% discount, with a subsidy ceiling of 5,000 yuan.

Now Chinese minivan makers are lifting their output to meet the possibly growing rural market demands. However, as part of China's stimulus package to boost the country's auto market, this rural subsidy policy is not very well received yet by many automakers and rural customers. The main reason is that the subsidies, as currently specified in the plan, only flow to rural buyers of light trucks and minivans.

China has about six minivan makers and some more light-truck makers, including SAIC-GM-Wuling, Changan, Changhe, Hafei, Jianghuai, Chery, and Foton. The majority of mainstream automakers in China, especially passenger car makers, are not lucky enough to benefit from the rural subsidy policy. Therefore, many automakers see this plan as "unfair play" in some sense.

And at the rural market, farmers have not responded quickly to the 10% subsidy for their buying of light trucks and minivans. One the one hand, many farmers who need these two types of vehicles have already bought them, and on the other hand, those who need these vehicles but have not bought them still cannot afford to pay the other 90% of the considerable price, because their incomes are difficult or impossible to increase amid the economic depression.

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