Gov't announces additional tax on luxury cars

Visitors are attracted by a luxury car model at an auto show in Beijing. Cars with a price tag of 1.3 million yuan ($189,000) and above will have an additional 10 percent tax levied on them from Thursday. (Photo/China Daily)

Move aims to curb lavish spending and cut auto emissions

China is levying an additional consumption tax on super luxury cars to curb lavish spending as well as automotive emissions. But analysts said the move is unlikely to have a major effect on car sales.

Starting on Thursday, cars with a price tag of 1.3 million yuan ($189,000) and above have had an additional 10 percent tax levied, the Ministry of Finance said.

That is, at least an additional 130,000 yuan.

The move is to "guide reasonable consumption, lower emissions and save energy", according to the ministry.

Bentley Motors China said in a statement that it respects and will abide by the additional tax policy, but "at this stage, it is too early to assess the full implications on our operations".

Aston Martin China said the policy may have some impact on the brand's performance in China in the near future, but the long-term effect may take time to appear.

"We constantly adjust to specific conditions in the markets in which we do business, and will do so for this taxation change in China," the British brand said in a statement.

John Zeng, managing director of LMC Automotive Consulting Shanghai, said the new move is "a little bit too mild" and will not affect the sales performance of luxury brands such as Aston Martin, Bentley, Ferrari and Rolls-Royce.

"They have a relatively stable customer base and those who can afford a 1.3 million yuan car would not mind paying an extra 10 percent," said Zeng, adding that a tax of less than 30 percent or even 40 percent would not yield the desired results.

Cui Dongshu, secretary-general of the China Passenger Car Association, said the tax hike is the latest move in the country's structural reform, which is a sign of the government's intention to stimulate mass consumption while curbing the consumption of luxury goods.

But, he said the move's effect on the overall auto market would be negligible due to the limited sales of such cars.

Most super luxury brands do not release their sales figures, but statistics quoted in media reports say that Bentley Motors sold 1,600 cars in China last year, while Ferrari delivered 673 units.

In the same year, 24.6 million cars were sold in China, the world's largest auto market since 2009.

Many super luxury carmakers have been eyeing China as one of their most important markets.