BEIJING – China has imposed a 10 per cent tax on cars such as the Ferrari GTC4Lusso, Bentley Bentayga and Aston Martin DB9 in a bid to combat conspicuous consumption and promote more fuel-efficient vehicles.
Buyers of cars costing 1.3 million yuan (S$269,545) or more were hit with the tax effective yesterday, according to the Ministry of Finance.
The levy on “super-luxury” vehicles is meant to “guide reasonable consumption”, lower emissions and save energy, the ministry said in a statement on its website.
China already taxes imported vehicles at a high rate, slapping a 25 per cent tax on all foreign cars shipped to China.
The extra charge is likely to hit brands such as Ferrari, Rolls-Royce, and Lamborghini, as well as top-end offerings of Mercedes and BMW.
“The tax increase is a display of the government’s attitude of advocating frugality,” said Mr Cui Dongshu, secretary-general of the Passenger Car Association.
“The increase in taxes on luxury cars may help make the extension of the small-car tax cut more likely given it is in line with the government policy of promoting cars with better fuel economy.”
Manufacturers of ultra-luxury vehicles have been shifting their lineups in recent years to appeal more to Chinese buyers, who generally prefer large autos over sports cars. Rolls-Royce and Aston Martin are both planning their first SUVs, following Bentley’s lead with the Bentayga, which starts at 3.98 million yuan in China.
Lamborghini SpA, which counts China as its second-biggest market (after the United States), sold more than 2,000 vehicles through June this year, a record for the carmaker. The Italian supercar maker is also planning to begin sales of the Urus SUV next year.
Aston Martin Lagonda “constantly adjusts to specific conditions in the markets in which we do business, and will do so for this taxation change in China,” a spokesman said by e-mail.
A spokesman at McLaren Automotive declined to comment beyond saying that the England-based carmaker was aware the Chinese government had been considering the move.
The government of President Xi Jinping has imposed a steadily widening series of austerity measures since 2013 to discourage corruption and what Beijing deems excessive spending. These measures have since chilled revenues for high-end restaurants and the sales of brandy, designer handbags and watches, and other luxury imports.
The new car tax is China’s latest move to curb spending by the country’s wealthy consumers.
While the additional cost will be a limited deterrent for people willing and able to spend vast sums on a car, it is another drag on these vehicles just as they were showing signs of recovery amid President Xi Jinping’s calls for thriftiness.
It also comes as the government considers extending a tax cut on smaller cars due to expire this month.
It is not clear whether the latest tax, which explicitly targets imports, might run afoul of Beijing’s World Trade Organization commitments to treat foreign and domestic goods equally. AGENCIES