China Re-Thinking Value-Added-Tax: May Lead To Premium EV Price Cuts

MAR 8 2019 BY GASGOO 13

Expensive, premium cars such as Teslas, might see some additional reductions.

Li Keqiang, Premier of the State Council of the People’s Republic of China, delivered the government work report at the second session of China’s 13th National People’s Congress opened in Beijing on March 5.

Among major national tasks for 2019, a key point saying that China is to “reduce the current rate of 16 percent in manufacturing and other industries to 13 percent, and lower the rate in the transportation, construction, and other industries from 10 to 9 percent” has triggered heated discussions in the automobile industry.

China announced in last March that the valued-added tax (VAT) rate for manufacturing and other industries would be cut to 16% from 17%, which came into effect on May 1, 2018. After that, such premium car makers as Lincoln, Mercedes-Benz, Jaguar Land Rover and Porsche lowered guide prices on quite a few models as response to the tax reduction.

The yet-to-be-executed tax cuts for 2019 may incur a new round of price decline on vehicles. “Based on 2018’s data, lowering one percentage point on VAT tax rate would correspondingly have the vehicle guiding prices reduced by around 0.8%,” said “Sangzhiwei”, an analyst of the China Automobile Dealers Association.

If the above calculation is still available to 2019’s situation, car prices are expected to be generally cut by 2.4% after the 3 percentage points are officially lowered.

On January 28, ten China’s governmental agencies jointly issued the Notice on Issuing the Implementation Plan for Further Optimizing Supply to Promote the Stable Consumption Growth and Facilitating the Formation of a Strong Domestic Market (2019).

In accordance with the Plan, to better satisfy residents’ travelling needs, various measures should be taken to boost automobile consumption, such as orderly promoting the scrapping and updating of old and used motor vehicles, continuously optimizing the subsidy structure of new-energy vehicles, promoting the upgrading and replacement of rural vehicles, steadily advancing the relaxation of the restrictions on pickup trucks entering the city, accelerating the prosperity of the used car market and further optimizing the motor vehicle management measures of local governments.

Some automakers in China, including FAW-Volkswagen, BYD, FAW Car, Beijing Motor, Haima Automobile, Great Wall Motor and Chery Auto, have joined the program to encourage car consumption by offering consumers subsidies and other preferential policies. Although the current efforts are mainly made by China-owned carmakers with limited price change, the 3-percentage-point decrease on VAT rate is expected to trigger a new round of price cut and get more companies, especially luxury car makers, involved in.

Source: Gasgoo

Categories: China

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13 Comments on "China Re-Thinking Value-Added-Tax: May Lead To Premium EV Price Cuts"

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So here’s my prediction, China lowers the VAT and Tesla lowers their car price accordingly, and then the Wall Street financial analysts merely report it as: “Tesla lowers prices due to softening demand.” (Hey, maybe I could work for Seeking Alpha?)

Notice the downvotes John by the shorters, shills and haters that constantly monitor and frequently post their FUD here on InsideEvs.

I notice it. What I also notice is beyond clicking the down-vote button, there ain’t much more to offer. Mix in a few ‘fanboy’ comments and that’s about the entire response spectrum from the anti-Tesla crowd. Until a better product comes along, I won’t feel guilty for appreciating the best thing going right now.

Only 6 out of 34, or 3/17. That is not too bad.

Oh, haven’t you heard? Every change that Tesla makes from now on is a desperation move, a panic response to collapsing demand for the Model 3.

I know it must be true, because more than one serial Tesla basher keeps repeating that! 🙄

Gets old reading that from the trash postings.

Are there actually any requirements for posting on SeekingAlpha? As far as I can tell, it’s just an investor-oriented social media platform…

This is really difficult to parse. It reads like a machine translation, which is a shame, as it seems that it might be an interesting story.

How are car companies supposed to do any long term planning and strategy with a government that’s almost constantly tinkering and micromanaging regulations and market forces? It must be particularly frightening for all the companies that are not well connected.

Pantarei , We can thank Trump for that !

(⌐■_■) Trollnonymous

I don’t care who to thank. If the VAT is going down for US companies in China then I thank them even if it’s Santa Clause or the Devil or the Tooth Fairy or the Easter Bunny!

The vast majority of these constant changes has nothing to do with foreign politicians…

Sounds like these changes apply to any product, whether it’s a car or something else, whether it’s cheap or expensive, whether it’s electric or combustion-powered? Very odd to report it as something related to premium EVs…