Buying a luxury car? Pay 10% surtax

Move aims to curb lavish spending, but wealthy 'won't mind'

China is levying an additional consumption tax on high-end luxury cars to curb lavish spending and emissions. But analysts say the move is unlikely to have a major effect on car sales.

Starting on Dec 1, cars with a price tag of 1.3 million yuan ($189,000; 177,000 euros; 148,000) and above will be subject to an additional 10 percent tax, the Ministry of Finance said.

That's 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, says the new move is "a little bit too mild" and will not affect the sales 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 won't mind paying an extra 10 percent," Zeng says, adding that any tax less than 30 percent, or even 40 percent, will not likely yield the desired results.

Cui Dongshu, secretary-general of the China Passenger Car Association, says 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 says the move's effect on the overall auto market would be negligible because of the limited sales of such cars.

Most super luxury brands do not release their sales figures, but data quoted in media reports show 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.

lifusheng@chinadaily.com.cn

(China Daily Africa Weekly 12/09/2016 page30)