German Automotive Association: China's Luxury Car Tax Poses Negative Impact on German Automakers

According to DPA news agency, China has long been a "land of prosperity" for German premium automakers. However, in recent years, it has gradually become one of their most challenging markets. Sales have sharply declined, with more consumers shifting toward locally produced Chinese brands. The luxury car tax has exacerbated this trend.

Last year, China adjusted its luxury vehicle consumption tax policy. The taxable threshold for new vehicles (excluding value-added tax) was lowered from 1.3 million RMB to 900,000 RMB (approximately 116,000 EUR). What impact has this policy had on German luxury brands and the Chinese automotive market?

The German Automotive Association (VDA) believes that German automakers have clearly suffered negative effects. In an interview, a VDA spokesperson stated: "The adjustment last year of what is called the luxury car consumption tax policy, as expected, has caused more pronounced adverse effects on European automakers, especially German ones, because the policy primarily targets high-value vehicles."

The spokesperson pointed out that the economic environment in China was already facing significant challenges when this measure was introduced, and these conditions persist today. The tax policy adjustment has further dampened Chinese consumers’ purchasing intent, while also negatively affecting Sino-European trade relations.

CPCA Secretary General Cui Dongshu believes that lowering the luxury car tax threshold has already significantly influenced market structure. He noted that demand for fuel-powered luxury cars priced between 900,000 and 1.3 million RMB has seen a "clear decline." German automakers are now forced to choose between two options: either pass on the additional tax burden to consumers by raising final prices, thereby weakening their competitiveness; or absorb the tax themselves, squeezing profit margins. Meanwhile, brands have begun reducing high-end optional features and striving to keep vehicle prices below the tax threshold. Consumers are increasingly turning toward high-end Chinese electric or hybrid models, as well as lower-priced used luxury vehicles.

However, Cui Dongshu believes the luxury car tax is not the biggest issue currently facing German brands. He emphasized that the rapid rise of Chinese premium brands represents the "decisive blow," while price wars and the luxury car tax policy merely bring "short-term additional pressure." He argues that the most urgent challenge German automakers currently face is their "clear lag in localizing intelligent vehicle technologies and electrification."

How are German automakers responding? BMW stated that the luxury car tax applies only to certain flagship models imported into China for sale. These models have relatively small sales volumes and cater to customers with strong purchasing power, so the new policy has "almost no impact on BMW’s overall sales in China." Audi said the new regulations affect only a very limited number of models sold by Volkswagen Group in China. Porsche noted that only some models are affected. Mercedes-Benz stated it is difficult to isolate the impact of the luxury car tax for analysis. Overall, competition across various segments of the Chinese market has intensified over the past several quarters, affecting both international and domestic brands. Mercedes-Benz added that vehicles impacted by the luxury car tax represent less than 5% of its total sales in China and all belong to flagship models, including the S-Class sedans and the Mercedes-Maybach series.

Although companies generally believe the luxury car tax has limited impact on overall sales, the fact remains that sales of German luxury brands in the Chinese market continue to decline. In the first half of this year, compared to the same period last year: Porsche’s deliveries in China dropped by 32%; Mercedes-Benz passenger car sales fell by 28%; BMW sales declined by 20%; and Audi sales decreased by 19%.

Source: rfi

Original article: toutiao.com/article/1871370226678919/

Disclaimer: This article reflects the personal views of the author