Luxury carmakers likely to slash prices after tariff cuts, domestic brands under pressure
China’s decision to slash tariffs on imported cars will put pressure on domestic car makers as the foreign brands are likely to start a fresh round of price cuts, said analysts.

China’s Ministry of Finance announced on Tuesday to cut tariffs charged on imported passenger vehicles from the current 25 percent to 15 percent, effective from July 1.

Wu Xiaobo, a financial columnist with, a news portal, wrote, “With prices of imported cars going down, domestic brands would be affected, although in recent years, many Chinese carmakers have already gone global and may be ready to brace the impact.”

In the past, China had several times called for import duties on automobiles and parts to be lowered but with no concrete actions till this year. In January, Liu He who’s now Chinese President Xi Jinping’s top economic advisor, said at Davos that “China will lower import tariffs for cars in an orderly way.”

During the annual “two sessions” period in March, Zhong Shan, China’s commerce minister, once again confirmed to lower tariffs charged on imported cars and some consumer goods.

Later, Chinese President Xi Jinping made it quite clear at the April’s Boao Forum for Asia that China will “significantly” lower tariffs for cars and lift foreign ownership limits on automakers. “It’s best implemented sooner rather than later,” Xi noted.

The Ministry of Finance also stated in its announcement that “the initiative will give a push to the supply-side structural reform through transforming and upgrading China’s auto industry.

Industry insiders believe the new development would usher in another round of price cuts among luxury car brands. Not long ago, with China cutting value-added tax rate for manufacturing and other sectors from 17 percent to 16 percent, came the first bout of price cuts. Bens, Jaguar, Land Rover, Lincoln, BMW and Audi successively announced to lower their retail prices in China.

“In 2017, China imported 1.21 million vehicles, 16.8 percent higher than the previous year,” according to the data of the China Automobile Dealers Association. Citic Securities predicted that with the new import tariff rates, retail prices would drop 8-15 percent, so the number of imported cars may stand somewhere between 1.5 and 2 million units.

“It’s foreseeable that beefed-up sales would trigger a new round of price cuts among luxury cars,” said Cao He, chairman of Quanlian Auto Dealers Investment Management (Beijing) Co, adding it’s hard to estimate the exact sales figure considering many foreign automakers still need to strike a balance between imports and local manufacturing. Cao said the 15 percent tax rate may be further brought down in the future., an auto news website, reported that several luxury automakers have reacted to the announcement of tariff cuts. Porsche, BMW, Audi and Volvo among others have promised to come up with “positive responses”, and adjust retail prices after evaluating relevant policies.

Tesla Inc., the No.1 electric carmaker in the US, was the first to take an action by cutting its prices immediately after China's announcement. According to a report by, a Shanghai-based news portal, Tesla lowered prices for all its six models now available in the Chinese market including Model S and Model X. The move would save Tesla buyers in the country 48,000 to 90,000 yuan.

“The price change becomes effective from tonight, and all relevant information has been delivered to out sales outlets across the nation,” a staff with the company's sales department was quoted as saying on Tuesday.

Cao He believes that in the circumstances, high-end products designed and manufactured by domestic automakers may face a downturn. “With falling prices of luxury cars, premium cars like Geely Lynk & Co and Great Wall WEY which have just gained growth momentum may be severely affected.” 

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