Mainland price war slows car imports

PUBLISHED : Monday, 18 July, 2005, 12:00am
UPDATED : Monday, 18 July, 2005, 12:00am

China's fiercely competitive car market, bourgeoning domestic production and new policies helped slash the number of car imports in the first half of this year by more than 30 per cent, despite a cut in the import duty, according to official figures published yesterday.

Customs figures showed imports in the six months of 64,000, a drop of 33.6 per cent over the same period last year. For all of last year, imports totalled 170,000 vehicles, an increase of more than 100,000 over 2001, the year China began reducing car import duties in line with World Trade Organisation rules.

The strength of the euro helped deter imports. In Guangdong, the price of the average imported car was US$40,000, an increase of 22.6 per cent over a year earlier, with the average price of vehicles from the European Union at US$49,000, up 11.6 per cent.

Another factor was fierce domestic rivalry, which has driven down prices and given consumers a dazzling array of China-made choices, including luxury cars.

With import tariffs down to an average 30 per cent, Beijing implemented policy changes in January that make it more difficult to turn a profit on imported vehicles.

The government abolished the system of bonded car warehouses at major ports, where dealers had previously kept imported vehicles while they searched for buyers. They did not have to pay the tax until the vehicle left the warehouse.

Now, dealers must pay the tax as soon as the vehicle arrives in the country.

The impact of these factors is reducing the market space for imported cars to those at the very top end, such as sports cars, Rolls-Royces and Bentleys.