HEFEI - China has launched a series of favorable policies to boost the sales of automobiles amid the country's efforts to resume car production and stabilize supply chains.

In the latest move, the country has decided to slash the purchase tax by half for passenger cars no more than 300,000 yuan ($44,800) with engine displacements within 2 liters purchased between June 1 and Dec 31 this year.

The tax, which usually stands at 10 percent of a vehicle's sticker price, has now been cut to 5 percent. The market impact of the tax cut has been almost immediate as car stores have already started to get a flurry of inquiries from prospective customers.

"We sold around 80 cars in May. Based on the current sales, we expect to sell 50 more cars this month thanks to the favorable policy," said Wang Guangnian, sales manager at a car dealership in Hefei, capital of East China's Anhui Province.

Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers (CAAM), estimated that the tax cut would generate additional sales of more than 2 million units and drive up auto consumption by over 300 billion yuan.

"If factoring in upstream and downstream industries such as auto parts, raw materials and financial insurance business, the tax cut will stimulate consumption in the entire industry by 500 billion yuan," Chen noted.

Apart from the national decision to reduce purchase tax, consumers are embracing more incentives for car purchases in different places across the country.

Huainan city in Anhui has released 10,000 digital coupons to encourage people to buy passenger cars in the city. Those who purchase a new car and register it in the city can receive a discount of 2,000 yuan.

More local Chinese governments are pitching in. In Beijing, by the end of 2022, those trading in for a new energy vehicle in the city will receive a subsidy of up to 10,000 yuan, while Shanghai has increased its quota for car ownership this year by 40,000.

In East China's Shandong province, local authorities have issued stimulus measures in the automobile industry by offering consumption coupons worth an estimated 500 million yuan for individual car purchases.

Overall, China's automobile production and sales rebounded in May from April, with total production and sales reaching 1.93 million and 1.86 million units in May, up 59.7 percent and 57.6 percent respectively month on month, according to the CAAM.

As the COVID-19 infections gradually waned and logistics disruptions were addressed in the country, China's auto industry is expected to go back to normal operation soon, said the association.