Incentives introduced to boost FAW sales

The local government of Northeast China's Changchun introduced incentives to boost the sales of loss-making automaker China FAW Group Corp.

The subsidies range from 3,500 yuan to 7,000 yuan ($550 to $1,100) per car, the company said on August 20.

The incentives are aimed at people with a registered residence in Changchun.

The policy covers the purchase of the Oley, Besturn B50/B70/B90 and Besturn SUV models. The highest subsidy is 7,000 yuan for the company's Besturn SUV.

The initiative, which started in July 1 and will end in June next year, will mainly benefit Changchun residents.

However, as FAW said in a press release, the gross profit margins for the car models are quite thin. Though sales are expected to grow as a result of the incentives, the policy may not have a significant impact on its overall revenue.

The policy also encourages the local government to purchase FAW cars as public service vehicles. FAW will be required to offer a 10 to 15 percent discount compared to market prices when selling the vehicles to the local government.

This is not the first time that an incentive program is launched to support automakers. In May, China Changan Automobile Group benefited from a rural subsidy program in Chongqing.

FAW is China's oldest automotive group. It ranked 165th in the Fortune Global 500 list this year.

However, the company is experiencing lackluster sales. It lost an estimated 45 to 75 million yuan in the first half of the year, compared to an 804 million yuan profit in the same period last year.