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Tax hike boosts prices of big cars

By Yu Hongyan (chinadaily.com.cn)
Updated: 2008-09-02 15:29

Despite the lackluster auto market, sales of cars with large engine capacities enjoyed an unprecedented high and selling prices have soared thanks to the vehicle consumption tax that began to take effect on September 1. 

The Ministry of Finance announced the adjustment last month. It means owners of cars with engines above a 4-liter capacity have to pay 40 percent tax, double the original rate. Owners of  vehicles with engines between 3 and 4 liters have seen a tax hike from 15 percent to 25 percent. Whereas, cars with engines below the capacity of 1-liter now enjoy a tax reduction from 3 percent to 1 percent.  

As the Beijing Times reported, prices of the best-selling big cars, like the BMW 7 series, Benz S350 and Toyota Prado, have already surged, with the margin of the price rise lower than that of the taxation lift. However, those with cold market response or short supply, remain unchanged in their selling price. 

German brands, like Audi, BMW and Benz, saw the price of their cars with engines above a 3-liter capacity increase half a month ago, and the growth rate stands at 70,000 yuan ($10,238.86)  to 80,000 yuan.

A sales person from Beijing Betterlife Automobile Trading Co Ltd said the Audi A8 4.2LFSI Prestige is out of stock now, as customers snapped it up before  the taxation adjustment came into effect. The supply is expected to resume next month. 

An Audi dealer commented that the current surge in price is due to dealers hoping to obtain exorbitant profit before the implementation of consumption tax. 

An Audi Q7 4.2L with the manufacturer suggested retail price of 1,232,000 yuan, sells at 1,432,000 yuan, up 200,000 yuan. "While after September 1, the price will probably rise to 1,472,000 yuan", said the dealer.

Japanese SUVs have followed the rising price trend. The Toyota FJ, Highlander, and Prado increased in price by more than 40,000 yuan.  

A sales manager from Guangzhou Toyota said the discount on the Toyota FJ remained at between 10,000 and 20,000 yuan. However, it has been cancelled for the FJ4.0L which has a recommended retail value of 450,000 yuan, and its selling price has been marked up by 20,000 to 30,000 yuan. 

 A dealer from Faw Toyota said that they hoarded some vehicles upon news of the tax rise, and began to raise the price half a month ago.  

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