rough idea of this project. We also thank Matthew Shum, Weimin Hu, Xiaolan Zhou and other participants at Five Star Forum, who made very help comments on this paper. All remaining errors are ours. Abstract This paper explores the effects of consumption and fuel tax regime adjustments on China's auto industry. Applying the model and simulation method of Berry, Levinson, and Pakes (1995), we conduct a comparative static analysis of equilibrium prices and sales, fuel consumption, and social welfare before and after tax adjustments. Further, for the first time, we compare the progressivity of both taxes. Our empirical findings suggest that fuel tax lowers vehicle consumption and consumer surplus more than consumption tax does, but our conclusion about the environmental effects of both taxes depends on the assumption of the fuel efficiency of outside fleets.