China will significantly reduce import tariffs on automobiles and auto components from July 1, as part of its efforts to further open up the world’s largest car market, the Ministry of Finance (MOF) announced on May 22.
According to a statement issued by the Customs Tariff Commission of the State Council, for complete cars, the 25-percent tariff levied on 135 items and the 20-percent duty on four items will both be cut to 15 percent. The items cover passenger cars and certain trucks.
Meanwhile, import tariffs on 79 auto parts, which range from 8 percent to 25 percent, will fall to 6 percent.
Industry analysts said the move will make imported vehicles less expensive, thus benefiting the massive number of consumers in China and encouraging competition in the industry.
After the cut, the average tariff on vehicles will stand at 13.8 percent, and 6 percent on auto parts, making China’s car import tariffs lower than the average for developing countries like India and Brazil with respectively 60 percent and 30 percent tariffs on imported passenger cars.
“Whether China will continue to cut auto import tariffs depends on the
competitiveness and development of the auto industry,” said the MOF.
Cutting auto import tariffs to this degree will help supply-side structural reform and the upgrade of the auto industry, bringing greater quality and efficiency, according to the ministry.
It will also enrich the domestic market and meet the demand for more, affordable consumer experiences. Lower tariffs will increase demand and bring vitality to the economy.
“By cutting these tariffs, many positive effects will be felt in the global economy,” said Liu Shangxi, head of the Chinese Academy of Fiscal Sciences.
Global auto companies will become more active in the Chinese market, and competition between international brands and Chinese auto manufacturers will become more heated, experts said.
Porsche, for which China is its largest market, said it is already working on a price adjustment based on the changes. Audi China said it also will evaluate the impact on the market and act accordingly.
“The tariff cut will undoubtedly bring more pressure to bear on Chinese brands, but China will not waver in continuing its opening-up policy,” said Dong Yang, deputy head of the China Association of Automobile Manufacturers (CAAM).
For domestic auto makers, it’s necessary and urgent to accelerate transformation and upgrading and grow to cope with the future competition.
Although the tariff cut will increase competition in the auto industry to improve its quality and efficiency, and bring car prices down, whether and by how much prices go down is yet to be seen since tariffs are only one of the factors in car pricing.
As the world’s largest auto market in terms of production and sale for nine consecutive years, China in 2017 produced more than 29 million vehicles and sold 28.88 million, up 3.2 percent and 3 percent respectively, according to the CAAM.
The country imported 1.22 million vehicles last year, mostly from the United States, Germany, Japan and the United Kingdom.