Reverse sanctions? China may reduce excise taxes on large-displacement vehicles in Europe

Buying a car

2024-06-30 22:17Creators in the automotive field

Recently, when the European Union announced that it would impose a 38.1% tariff on new energy vehicles exported from China to Europe, China did not seem to retaliate directly, but considered adopting an unconventional strategy - reducing the consumption tax on large-displacement vehicles imported from Europe. This move may seem contrary to the conventional counter-sanctions, but in fact it has a deep meaning.

For a long time, China's consumption tax on automobiles has been differentiated based on the vehicle's displacement. The larger the displacement, the higher the tax rate. The tax rate is as high as 25% for large displacement vehicles over 3.0 liters, and 40% for vehicles over 4.0 liters. Add to that the 15% tariff on imported cars and the 13% value-added tax, and luxury models like the Rolls-Royce Cullinan account for almost half of the total price of the vehicle before it reaches Chinese consumers.

But this time, China is not considering the reduction of all imported cars, but mainly for those large-displacement cars of European luxury brands, such as Lamborghini and Ferrari. Although the sales volume of these ultra-luxury cars in the Chinese market is not huge, each one represents the brand's ultimate pursuit and exquisite craftsmanship. Moreover, these models are often closely linked to European car culture and are coveted by many fans and collectors.

However, this strategy is not without purpose. China's move may be sending a signal to the EU that we are willing to show good faith by lowering the excise tax on your large-displacement vehicles, and that you will also reconsider your tariff policy on China's new energy vehicles. This strategy of retreating is a very smart choice.

This policy adjustment could also have a series of ripple effects. This is undoubtedly good news for European brands that were already planning to launch large-displacement cars in the Chinese market. They can enjoy lower tax rates, making them more competitive in the Chinese market. Second, for those models that are produced in the U.S. but sold in China with large sales, they may not directly benefit from the tax rate adjustment, but they may also feel the pressure of market competition indirectly. Finally, this policy may also promote the local production of these models in China, thereby driving the development of related industrial chains.

From a more macro perspective, this policy adjustment is not only a soft counterattack to the EU's tariff policy, but also a strategic layout for the long-term development of China's auto market. By reducing the consumption tax on large-displacement vehicles in Europe, China can attract more international brands to invest in production in China, further promoting the upgrading and transformation of the local automotive industry. At the same time, it will also intensify market competition and promote the development of China's auto market in a healthier and more sustainable direction.

China's strategy of reducing the excise tax on large-displacement vehicles in Europe is not only a response to the EU's tariff policy, but also a long-term development layout for China's auto market.

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