China is considering proposals to cut import duty on passenger cars by about half, according to people with direct knowledge of the matter, a move that’s set to give a lift particularly to luxury-car makers such as BMW AG and Toyota Motor Corp.’s Lexus unit.
The State Council, or China’s cabinet, is weighing proposals to reduce the levy on imported cars to 10 percent or 15 percent, said the people, who asked not to be identified as the information isn’t public. The current rate is 25 percent. An announcement on the decision could be made as soon as next month, they said. The finance ministry didn’t respond to a fax seeking comment.
The move comes as investors and executives fret about a trade war between China and the U.S. China has responded to U.S. President Donald Trump’s tariff threats with similar force — though at the same time it has signaled opening up its finance and auto industries. Trump said on Tuesday that Treasury Secretary Steven Mnuchin will depart for China within days.
A lower tariff would also benefit brands such as Daimler AG’s Mercedes-Benz and Volkswagen AG’s Porsche as their imported models would become more competitive against locally manufactured vehicles.
China is heeding decades-long pleas from automakers for better access to its auto market, as domestic manufacturers prepare to expand abroad. Last week, China announced it will permit foreign automakers to own more than 50 percent of local joint ventures, giving a boost to global companies seeking to capture a greater share of the world’s largest light-vehicle market.
Earlier this month, President Xi Jinping repeated the nation’s commitment to reduce import tariffs on vehicles this year, without disclosing the magnitude of the proposed cut.
While cars imported from the U.S., such as Tesla Inc. models, will also benefit, they may still face an additional hurdle. As part of the trade spat, China has threatened to slap an additional 25 percent import duty on cars made in the U.S., which would come on top of any other tariffs. Tesla CEO Elon Musk responded to Xi’s announcement for the lowered overall tariffs on April 10 by saying the move was a “very important action by China.”
Higher priced vehicles, in particular, will benefit from the cut in tariffs, as less of their production has moved locally. For example, Lexus would benefit as the only premium Japanese marque that doesn’t manufacture in China or hasn’t announced plans to do so.
China imported 1.22 million vehicles last year, or about 4.2 percent of the country’s total sales of about 28.9 million automobiles.