China is considering cutting import duty on passenger cars by about half, according to people with direct knowledge of the matter, a move that’s set to give a lift particularly to luxury-car makers, such as BMW AG and Toyota Motor Corp.’s Lexus unit.
The State Council or China’s Cabinet, is weighing proposals to reduce the levy on imported cars to 10 percent or 15 percent, said the people, who asked not to be identified as the information isn’t public. The current rate is 25 percent. An announcement on the decision could be made as soon as next month, they said.
China’s finance ministry didn’t immediately respond to a fax seeking comment.
A lower rate will benefit carmakers—including BMW, Daimler AG and Toyota—as their imported models would become more competitive against locally manufactured vehicles.
Last week China announced it’ll permit foreign automakers to own more than 50 percent of local ventures, removing a two-decade restriction and giving a boost to global companies seeking to capture a greater share of the world’s largest car market.
Earlier this month President Xi Jinping repeated the nation’s commitment to reduce import tariffs on vehicles this year, without disclosing the cut’s magnitude.
Xi’s comments were made as the United States and China intensified a rhetoric that threatened an all-out trade war between the two largest economies. While cars imported from the US, such as Tesla Inc. models, will also benefit, they may still face an additional hindrance.
As part of the trade spat, China has threatened to slap an additional 25-percent import duty on cars made in the US, which would come on top of any other tariffs.
Tesla CEO Elon Musk responded to Xi’s announcement for the lowered overall tariffs at the time by saying the move was a “very important action by China.”
Foreign automakers have been asking for decades for a lower import duty as that would help them increase their presence in the local market without having to manufacture each model in the world’s biggest passenger-vehicle market.
High-end autos, in particular, will feel the effects of a tariff cut, as less of their production has moved locally. For example, Toyota’s Lexus would benefit as the only premium Japanese marque that doesn’t manufacture in China or hasn’t announced plans to do so.
China imported 1.22 million vehicles last year, or about 4.2 percent of the country’s total sales of about 28.9 million automobiles.