Recently, the Ministry of Finance and the State Administration of Taxation issued an announcement to adjust the consumption tax policy for super luxury cars in order to further guide rational consumption. One of the most core changes is to lower the tax threshold from the previous retail price (excluding value-added tax) of 1.3 million yuan to 900,000 yuan. The relevant adjustment measures were officially implemented on July 20.
This is the most significant policy change since my country established the consumption tax system for super luxury cars in 2016. In order to guide rational consumption and promote energy conservation and emission reduction, in November 2016, the Ministry of Finance and the State Administration of Taxation issued regulations to add a sub-tax item of "super luxury cars", which will be taxed on passenger cars and medium and light commercial buses with a retail price of RMB 1.3 million (excluding VAT) or more.
"We don't know anything. If someone knows, some news will leak out." Chen Jiamei, a Porsche dealer in Jiangsu, told China Auto News. The new policy only has a two-day transition period, and one of the days is a weekend, which caught many luxury car dealers off guard. After the huge shock, the ultra-luxury car market will usher in a reshaping of the landscape.
The threshold has been reduced to 900,000 yuan: These popular models will cost more
It is understood that the consumption tax threshold for super luxury cars was previously 1.3 million yuan (the invoiced price including VAT is 1.469 million yuan), but after this adjustment, the consumption tax threshold has been lowered to 900,000 yuan (the invoiced price including tax is 1.017 million yuan). In other words, as long as the car price exceeds 1.01 million yuan, an additional consumption tax of 10% must be paid, which is equivalent to spending more than 100,000 yuan.
Industry insiders told reporters that the new policy will affect Mercedes-Benz's S-Class, GLS, Maybach S480, AMG series; BMW's X7, X5M Thunder, X6M Thunder, XM; Porsche's 911, Panamera, Taycan and some high-end Cayenne; Land Rover's Range Rover Grand Edition, Defender V8; Toyota's Alphard and Vellfire; Audi's A8, and the independent brand Zunjie's S800 2025 Extended Range Xingyao Executive Edition 4-seater; and the U8. Among them, the Porsche brand is probably the most affected.
Chen Jiamei introduced that Porsche 911, Carrera and other models were originally within the tax range because their prices exceeded 1.3 million yuan (excluding VAT). The entry-level Cayenne, with a guide price of 918,000 yuan, was included in the tax range of the new policy; the Taycan rear-wheel drive basic version was also included with a guide price of 918,000 yuan; the Panamera executive extended version was also included with a guide price of 1.138 million yuan.
In addition, considering that consumers usually choose optional features when purchasing a car, Porsche's sales model, which uses optional features as an important profit point, may cause more models that were not originally in this range to fall into the tax category because the total price after optional features exceeds 900,000 yuan (excluding value-added tax).
The taxation of Range Rover models has also changed significantly. Chu Jianjun, a Land Rover dealer in Zhejiang Province, said that previously only 2-3 models of Range Rover were subject to tax, but now all models are included in the tax scope. Although the suggested price of the Range Rover Sport model is more than 900,000 yuan excluding tax, it should be included in the tax scope, but the actual market price is lower than this standard. The tax department may consider the difference between the suggested price and the actual selling price as a suspicion of malicious tax evasion.
Chu Jianjun said that he is communicating with the local tax authorities to collect taxes based on the actual transaction price. "They can't understand why the sales price is lower than the suggested price, but the current market conditions in the auto industry are not good, and price inversion is commonplace. It is normal for a million-level car to have a discount of 200,000 or 300,000 yuan, and it is not a deliberate tax evasion. We also want to sell at the suggested price, but consumers don't accept it," he said.
Image source: Mercedes-Benz official
Some people have cleared their inventory, while others have only added 2 orders
The increase in car purchase costs is bound to have a certain degree of impact on existing market sales.
Chen Jiamei introduced that due to weak consumer demand, the sales volume of super luxury cars this year has been unsatisfactory. The store used to sell 30 to 40 cars a month, but now sometimes it only reaches double digits.
At the same time, changes in the market structure have also brought impacts. At present, consumers' demand for vehicles is gradually leaning towards new energy, and new energy products represented by Xiaomi-related models have attracted attention. These models are not only fashionable in design, which fits the preferences of young people, but also relatively cheap, forming an advantage in cost performance, diverting some potential customers of super luxury cars. The adjustment of consumption tax policy has further increased sales pressure, making the already poor sales situation even worse.
The imagined frenzy of buying did not happen at the 4S store where Chen Jiamei worked. On the night of July 17, when the policy was released, the sales staff at her 4S store worked overtime to sort out customer information and contact customers. In order to prevent customers from giving up on their purchases due to paying more than 100,000 yuan in taxes and fees due to the policy adjustment, the 4S store coordinated with the manufacturer to issue invoices for the vehicle frame number in advance. However, on July 18, only two new potential customers were added.
In contrast, the Land Rover 4S store where Chu Jianjun works has seen a huge increase in sales due to the introduction of the new policy. He said that thousands of Range Rovers were sold nationwide in two days. Their store is also working hard to clear inventory. As soon as the policy was announced, the store promoted it by calling interested customers and promoting it on WeChat Moments. At the same time, it also used various channels to find interested customers, striving to sell the inventory vehicles in a short period of time. At present, nearly 20 inventory vehicles in the store have been cleared, "which is the sales volume of the previous month."
Among manufacturers, Jaguar Land Rover China responded the fastest, announcing on July 20 that from the start of the new policy to July 31, if consumers purchase designated models at authorized Jaguar Land Rover dealers and issue retail invoices, the additional consumption tax on the bare cars will be borne in full by Jaguar Land Rover.
Image source: Jaguar Land Rover official
Chu Jianjun said frankly that this measure has indeed relieved the pressure on dealers to a certain extent. Manufacturers' actions can encourage dealers to clear their inventory and avoid dealers being overloaded with goods, which can also reduce the pressure on manufacturers themselves. "It is a mutually beneficial approach for manufacturers."
On the morning of July 22, Chen Jiamei also sent the latest sales poster and stated that the manufacturer issued the latest policy on the evening of July 21, which would cover the additional taxes and fees generated by the tax reform for the purchase of designated Porsche models before August 31.
Photo provided by dealer
Automobile tax reform has begun
The adjustment of luxury car taxes has also had a significant impact on the parallel imported car sector.
Zhang Tingting, secretary-general of the Tianjin Parallel Import Automobile Circulation Association, introduced that after the luxury car tax collection base was lowered, the vast majority of vehicles sold by parallel import car dealers, including the originally popular Land Cruiser, were included in the tax scope, which directly increased the car purchase cost for mid- to high-end consumers.
She said that in the current consumption environment, even luxury car consumers are not as indifferent to extra expenses as the outside world thinks. Their willingness to buy cars is also affected, and the size of the consumer group has shrunk to a certain extent. For the parallel imported car industry, which is already facing difficulties, the new policy will further reduce sales. Faced with the current situation, the industry is adjusting its strategy: reducing the overall import volume, while turning to importing lower-value or more personalized models to cope with the current market pressure.
In fact, the adjustment of the consumption tax policy for super luxury cars indicates that my country has taken the first step in the reform of its automobile tax system. Behind it lies a long-term idea of tax optimization reform, which will have a long-term impact on the market structure.
The China Automotive Technology and Research Center Co., Ltd. (hereinafter referred to as "CATARC") published an interpretation article on its WeChat official account, pointing out that my country's current consumption tax policy for super luxury cars has been implemented for more than eight years since December 2016, and has played a certain role in guiding rational consumption and promoting energy conservation and emission reduction. At present, the automobile market structure has undergone new changes, and the policy adjustment is conducive to further playing the guiding role of the consumption tax on super luxury cars, which can be said to be timely.
First, the reduction in value-added tax has led to a drop in the price of super luxury cars; second, high-priced models are still mainly fuel vehicles, and the increase in consumption tax can curb high pollution and luxury consumption; third, there are large differences in the tax system between fuel vehicles and new energy vehicles. As the market size of new energy vehicles grows, it should be considered to gradually include new energy vehicles in the tax scope. The consumption tax adjustment for super luxury cars this time also includes pure electric and fuel cell vehicles in the tax scope.
According to the forecast of the China Automotive Strategy and Policy Research Center, after this policy adjustment, the annual taxable sales of passenger cars is expected to increase by more than 100,000 units, of which fuel vehicles will account for more than 90%, plug-in hybrid vehicles will account for about 7%, and pure electric and fuel cell vehicles will account for less than 3%.
The China Automotive Technology and Research Center pointed out that my country's automobile market structure is shifting from being dominated by fuel vehicles to being dominated by new energy vehicles. It is expected that the market penetration rate of new energy vehicles will exceed 50% in 2025, but new energy vehicles currently account for a relatively low proportion of the overall tax contribution. An automobile tax system that adapts to the new industrial situation needs to be established urgently.
(The original title is "Behind the Luxury Car Tax Adjustment: my country's Automobile Tax System Reform Begins"; at the request of the interviewees, Chen Jiamei and Chu Jianjun are both pseudonyms)