Mar 18, 2019 (China Knowledge) - Luxury car brands are now lowering their vehicle prices in China after the government has announced that it would be lowering value added tax (VAT) in the country.
The price reductions highlight the poor sales these luxury car brands have been faced with for the first two months of this year as the demand in the Chinese auto market slows down after nearly three decades of rapid growth.
Last week in Beijing, the government announced that VAT on manufacturers will be reduced from 16% to 13% on 1st April, a move that will eventually benefit consumers as companies reduce the prices of finished goods.
The lowered rate is expected to result in an average 2% price reduction on finished cars in the country.
The price cuts introduced by car manufacturers aim to boost sales in the market as these manufacturers ride on the benefits brought about through government incentives. In addition, the National Development and Reform Commission (NDRC) has also said that boosting vehicle sales would be part of their strategy to drive domestic demand in China.
The auto market which has been one of the main driving forces behind the rapid expansion of the Chinese mainland economy was hit with a contraction of 2.8% last year, the first since 1992 due to a wider economic slowdown in the country and the US-China trade war.
Outlook for the auto market in 2019 still remains weak with consumer demand still yet to recover, however high-end cars may see some moderate growth this year given the incentives currently being given out by manufacturers.
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