By Wang Shen
The China State Council announced on Tuesday that starting from July 1, the current tariffs on imported vehicles ranging from 20 percent to 25 percent will drop to 15 percent, and the tariffs on auto parts currently ranging from 8 percent to 25 percent will drop to 6 percent.
After these adjustments, the average Chinese tariff on whole vehicles will be 13.8 percent, and the average tariff on auto parts will be 6 percent, which is according to the current conditions of the Chinese automobile industry.
The China State Council suggested that appropriate reductions in tariffs could help automobile products to improve their quality and returns, enrich the domestic market supply, and fulfill consumers' various needs.
The principal of the Customs Tariff Commission of the State Council stated that the price of vehicles depends on various factors and import tariffs is one of them. The market price determined by manufacturers is also an important factor in a product's final selling price.
The CITIC Securities Corporation estimated that the final selling price for imported cars would decrease by 8 percent to 15 percent, and the sales volume will be at 1.5 million to 2 million.
Li Xuhong, the director of the Institute of Financial and Taxation Policies and Applications in the Beijing National Accounting Institute, believed that tariffs on vehicles across the world have a trend of decreasing, along with economic globalization and the progress of global trade. Thus, reductions in Chinese vehicle tariffs is a vital measure to comply with global trade liberalization.
The China FAW Group Import & Export Company senior manager, Leng Changchun, said that the reduction in tariffs would attract more foreign automobile companies to trade and invest in the Chinese market, which will also stimulate domestic brands to develop and improve themselves, as well as accelerate the industry's transformation and upgrading.
The China Automobile Dealers Association stated that this adjustment would mostly affect the luxury cars market since they have higher original costs. Some luxury brands, such as Volvo, Porsche, BMW, Tesla, and Audi suggested that they would evaluate their current pricing systems and adjust their selling prices accordingly to provide their customers with more benefits, which will make the market more competitive.
Another focus of the policy adjustments is on decreasing the tariffs on auto parts, which will have a substantial impact on the price of imported auto parts. These adjustments will make a significant change to luxury cars' repair and maintenance costs.
Xiang Xing, the Anhui Jianghuai Automobile Group Corporation general manager, pointed out that multinational companies would reevaluate to see if it is cheaper to produce specific vehicle models in China or import them from other countries. These companies will seek lower costs and higher returns to improve their brand's position in the market.
Xiang Xing also predicted that the elimination of poorly performing automakers in the automobile industry would intensify, and the number of mergers and reorganizations will rise as well.
According to the Financial Times, German carmakers might be the largest beneficiary of the tariff adjustments. Jato Dynamics' data indicates that one-third of Chinese imported cars in 2017 were produced by German automobile manufacturers.
In conclusion, the tariff adjustments on automobiles and auto parts will attract more foreign automobile companies and encourage domestic companies to improve themselves. Many foreign vehicle brands will welcome the tariff reductions and will adjust their selling prices accordingly.
