Which of the top ten car companies in import volume has the greatest impact on tariff cuts?

Since 2011, sales of imported cars in China have reached a million for seven consecutive years. In the whole year of 2017, the number of imported cars reached 1.216 million, an increase of 16.8% year-on-year, and the import volume experienced a two-year decline in 2015-2016, and rebounded rapidly in 2017.

On May 22, the State Ministry of Finance issued an announcement that, starting on July 1, 2018, the import tariffs on vehicles and parts will be reduced. Among them, the vehicle tax rate will be reduced to 15%, the highest rate of decline of 10%. This good news for imported cars is like a thunderbolt "fried" into the car circle, many car companies in China have imported car business, especially luxury brands and ultra-luxury brands issued a statement the first time. The caliber of everyone is very uniform. Both of them expressed their welcome to this move to further promote market liberalization. They will evaluate the current proposed retail price system, and adjust the prices of relevant products so as to maximize the benefits of the policy to consumers and benefit Chinese consumers.

According to the data released by the CLUCC, the top ten brands that entered the car import volume in 2017 were: BMW, Mercedes-Benz, Lexus, Toyota, Porsche, Land Rover, Lincoln, Volkswagen, Audi and MINI. In the top ten of 2017, the combined import volume of these brands accounted for 78.18% of the total imports of passenger vehicles in the current year (in 2017, the total import of passenger vehicles was 1,200,710 units). So among these top ten brands, who will have the greatest influence on the import tariffs of auto vehicles that will be formally adjusted in the second half of this year?

Who has the greatest impact on the drop in import tariffs?

As for BMW, which ranked first in terms of car imports in 2017, the total vehicle import volume for the year was 187,373 units, a year-on-year increase of 9.1%. In the entire product structure, BMW's imported vehicle business in China accounted for 33% of the total sales. At the same time, BMW, which has the top ten imported cars, also accounted for two seats. X3 (home-made version will be listed soon) and X5 are on the list. In the top five.

For the Lincoln brand that has been announced to be made domestically in the future, but is currently sold entirely in the form of imports in China, although it is relatively late to enter China in the top ten imported brands, it can see an increase of sales of 78.5% in 2017, further proving that The potential for its development in China, especially the reduction in the price of finished vehicles brought by the tariff reduction, will increase the competitiveness of imported vehicles.

In addition, Audi was ranked among the top ten in terms of import volume in 2017, and the only imported car that did not achieve positive sales growth. Audi's total sales volume of imported vehicles for the year was 49,065 units, a year-on-year decrease of 13.3%. The imported vehicle business accounted for less than 10% of the total sales of the company. However, from the data of the first quarter of 2018, Audi brand imports have apparently rebounded. Perhaps in the context of this year’s continued youthfulness strategy and the growing product lineup of the RS family and Avant family, with the help of the reduction in import tariffs in the second half of the year Audi's promotion of imported car business will usher in an opportunity.

According to analysis by industry insiders, the above three brands are positively affected by the reduction of automobile import tariffs and are expected to be more prominent than other brands.

Will impact on domestic cars?

However, reducing the impact of auto import tariffs on the Chinese auto industry will not stop there. According to analysis by industry insiders, as the tariffs of automobiles are reduced greatly, the cost-effectiveness of imported cars will be greatly increased. The expansion of the size of imported cars will bring about a certain impact on domestic cars. In particular, the import of large-displacement and high-fuel-consuming models is due to lower prices after tariff reductions, or a greater purchase demand.

An imported car must be taxed in three links, including tariffs, consumption taxes, and value added taxes. Calculation method: import tariff = CIF × 25% (pre-adjustment tax rate); import consumption tax = (CIF + import tariff) ÷ (1-consumption tax rate) × excise tax rate (tax rate varies from 1% to 40%) Import VAT = (CIF + import tariff) ÷ (1 - import excise tax rate) × 16%.

According to industry estimates, according to the current tariff of 15%, the CIF of imported cars plus the three taxes, the overall cost of car purchase is expected to decline by 8.8%. Based on this analysis, it is expected that the increase in the size of imported cars will reach 300,000 or more, and the total scale of the imported cars is expected to reach more than 1.5 million, of which the fastest growing will also be dominated by the mainstream B-class vehicle market.

The responsible person of the Ministry of Finance stated that China’s maintenance of the multilateral trading system and the reduction of automobile import tariffs this time is a major measure for China’s further expansion of reform and opening up. After the tax reduction, the average tax rate for China's auto vehicles is 13.8%, and the average tax rate for parts and components is 6%, which is in line with China's auto industry.

The responsible person also said that a considerable reduction in automobile import tariffs will help promote supply-side structural reforms, promote structural adjustment and transformation of the auto industry, and guide auto products to improve quality and efficiency, enrich the domestic market supply, and satisfy the people. Diversified demand will bring richer and more affordable consumer experiences to domestic consumers.

The policy of further opening up, strengthening cooperation, and mutual benefit will be a positive signal to the market. It will undoubtedly bring about healthy and orderly competition, help the prosperity of the entire automotive industry, and ultimately benefit consumers. (Photo/Wenjin Wang Jingya; part of the picture from the SINOMA)