Surprise! Major Changes in Imported Car Tariffs in 2018, Where Will the Industry Go?

In 2018, the automobile market witnessed a storm related to imported car tariffs. The change in this policy, like a huge rock thrown into a calm lake, caused ripples in the automobile industry. Both automobile manufacturers and a large number of consumers are closely watching the impact brought about by this tariff adjustment.

On May 22, 2018, the Tariff Commission of the State Council issued an announcement that starting from July 1, 2018, the import tariffs on complete vehicles and auto parts would be reduced. The tax rates of 135 tariff items with a vehicle tax rate of 25% and 4 tariff items with a tax rate of 20% would be reduced to 15%, and the tax rates of a total of 79 tariff items with auto part tax rates of 8%, 10%, 15%, 20%, and 25% would be reduced to 6%.

This adjustment range is not small. For the imported car market, it is a major policy change. Such a significant reduction in tariffs aims to further expand opening up to the outside world, promote the globalization of competition in the automobile industry, and optimize the industrial structure of the domestic automobile market.

From the perspective of automobile manufacturers, the reduction of import tariffs has led to a decrease in the cost of imported cars. For some luxury brand automobile manufacturers, the originally high tariffs were one of the important factors for keeping product prices high. After the reduction of tariffs, they have more room for price adjustment. For example, brands like Mercedes-Benz and BMW may consider appropriately reducing the terminal selling prices to enhance their market competitiveness. Meanwhile, for domestic automobile manufacturers, this is both a challenge and an opportunity. The challenge is that the price reduction of imported cars may seize part of the domestic mid-to-high-end automobile market share; the opportunity is to prompt domestic automobile enterprises to accelerate technological research and development and product upgrading to enhance their own competitiveness to cope with more intense market competition.

From the dealer level, with the reduction of import tariffs, the cost of inventory vehicles may need to be recalculated. Some dealers may choose to accelerate the digestion of inventory before the tariff adjustment to avoid the depreciation of inventory vehicles due to the tariff reduction. For dealers who are preparing to purchase goods, after the tariff adjustment, the purchase cost is reduced, and they can obtain vehicles at a more favorable price, which may stimulate the sales enthusiasm in the market to a certain extent.

Consumers are undoubtedly the focus of this tariff adjustment. After the reduction of tariffs, the most intuitive impact is that the price of imported cars is expected to decline. Taking an imported car with a CIF price of 300,000 yuan and a displacement of 3.0 liters as an example, before the tariff adjustment, the comprehensive tax rate was about 95%, and the vehicle price including tax was about 585,000 yuan; after the tariff adjustment, the comprehensive tax rate was about 66%, and the vehicle price including tax was about 498,000 yuan, and consumers can save nearly 90,000 yuan. This is undoubtedly good news for those consumers who are fond of imported cars. The reduction of the cost of purchasing cars enables more people to have the ability to buy imported cars.

However, while expecting price reductions, consumers also need to view it rationally. Although the reduction of tariffs provides room for price reduction, the price of automobiles is also affected by various factors such as brand strategies and market supply and demand. Some brands may not transfer all the dividends of tariff reduction to consumers but choose to maintain the relative stability of prices by enhancing brand images and other means.

The adjustment of imported car tariffs in 2018 is just one chapter in the transformation of the automobile industry. With the deepening of global economic integration, future imported car tariff policies may be further adjusted according to factors such as the international economic situation and the development needs of the domestic automobile industry. Both practitioners in the automobile industry and consumers need to continuously pay attention to policy developments to better adapt to market changes. Let us jointly look forward to that in a more open and competitive market environment, the automobile industry can bring us more high-quality and affordable products.