Car tariffs to be cut to 15% as part of opening pledge

Policy set to boost domestic competition

China will cut import tariffs for cars and auto parts, the Ministry of Finance said on Tuesday, making good on China’s pledge to further open up the world’s largest auto market to foreign companies.

According to the ministry’s statement, tariffs on cars imported to China will be cut from 25 to 15 percent. Tariffs on imported trucks will also be cut from 20 to 15 percent, while tariffs on car components will be streamlined and cut steeply to a single rate of 6 percent.

The changes will become effective on July 1.

The decision follows a pledge made by Chinese President Xi Jinping during the Boao Forum for Asia held in South China’s Hainan Province in April. Xi said China would significantly reduce tariffs on auto imports and further open up the automotive market to foreign investment.

Shares in automakers with a presence in China such as BMW, Daimler and Volkswagen rose in European markets following the news.

The tariff reduction was welcomed by foreign automakers.

“The move is a strong signal that China will continue to open up. This will certainly benefit the customer,” a BMW China representative told the Global Times on Tuesday, adding that the company will soon adjust its prices in China in response.

Xu Yiming, spokesperson for Toyota China, told the Global Times the company will soon announce a drop in retail prices for cars exported to China.

The reduction in tariffs is expected to especially affect the higher end of the car market. “The tariff reduction will bring down prices for cars imported to China, which tend to be luxury cars. That will bring some downward price pressure for domestic automakers in the higher-end range of the market,” Zhang Yale, managing director of Automotive Forecast, told the Global Times on Tuesday.

China’s auto imports are still growing, with 1.2 million cars imported in 2017 according to the Chinese Automobile Dealers Association.

“The import market is strong and will certainly continue to grow in 2018,” Mei Songlin, vice president and managing director of China operations at JD Power, told the Global Times. The tariff reduction will bring down prices by about 8 percent, Mei said.

China’s National Development and Reform Commission, the country’s top economic planner, announced on April 17 that foreign automakers will be able to operate fully on their own by 2022, while manufacturers of new-energy vehicles will be able to operate fully owned subsidiaries in 2018.