China hikes taxes on luxury cars | Business| Economy and finance news from a German perspective | DW | 01.12.2016
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China hikes taxes on luxury cars

China has imposed an extra 10 percent tax on premium cars amid a government crackdown on conspicuous luxury consumption. But this is unlikely to slow carmakers' rising sales.

The new tax had taken effect on Thursday, the Chinese finance ministry said, and was intended to "guide rational consumption" as well as promote energy-efficient cars.

Buyers of high-end vehicles that cost above 1.3 million yuan ($190,000 or 177,000 euros) would have to pay the tax on top of an existing 25-percent tax on all foreign cars shipped to China, the ministry added.

Under President Xi Jinping, the Communist Party has launched a massive campaign against corruption, also targeting ostentatious shows of wealth and encouraging a moderate lifestyle among the country's political and economic elites. The drive has already hit domestic luxury sales from premium alcoholic spirits to handbags.

Cool carmakers

The new tax rate will potentially affect pricing for top-of-the-range models from brands like BMW, Mercedes-Benz and Audi, as well as super high-end marques like Ferrari, Aston Martin and Rolls-Royce.

Despite the campaign, they have seen massive growth in China, with, for example, Ferrari sales having surged 26 percent in the second quarter of this year. 

But carmakers played down the impact of the new tax, saying it would only impact a small number of models, and that wealthy Chinese buyers were unlikely to be put off by "a relatively marginal price hike" on already expensive cars.

"The majority of our business will not be impacted. But because this was just announced yesterday, we are still evaluating to see what impact we might see on our business," a Beijing-based BMW spokesman told the news agency Reuters. He added that only "a small portion" of the cars BMW sells in China were priced above 1.3 million yuan.

Audi said in a statement that cars above 1.3 million yuan made up less than 1 percent of its deliveries in China. "Emotion and status are significant drivers for the upper premium segment. The effect on deliveries should be limited as the new tax rate concerns all manufacturers," the statement added.

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uhe/sgb (Reuters, AP, AFP)


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