China is to cut the import duty on passenger cars to 15 percent, boosting automakers such as Bayerische Motoren Werke AG (BMW) and Ford Motor Co just as the immediate threat of a trade war with the US recedes.
The Chinese State Council has decided to reduce the levy from the 25 percent that has been in place for more than a decade, said people familiar with the plan, who asked not to be identified as the information is not public.
Bloomberg News last month reported that China was weighing proposals to reduce the car import levy to 10 percent or 15 percent.
A reduction in import duty follows a truce between US President Donald Trump’s administration and Chinese officials as they seek to defuse tensions and avert an all-out trade war.
While the levy reduction could be claimed in some quarters as a concession to Trump and would be a boon to US automakers such as Tesla Inc and Ford, the move would also end up benefiting European and Asian manufacturers from Daimler AG to Toyota Motor Corp.
Shares of Jaguar Land Rover Automotive PLC owner Tata Motors Ltd and BMW yesterday jumped on the news.
Tata Motors surged as much as 4.7 percent in Mumbai, while BMW rose as much as 1.5 percent in Frankfurt, Germany.
Daimler added as much as 1.3 percent.
Chinese automakers BAIC Motor Corp (北京汽車), BYD Co (比亞迪) and Guangzhou Automobile Group Co (廣州汽車集團) also held to gains as the reduction in the tariff was not as large as it could have been.
Luxury sales leader Audi AG, part of Volkswagen AG, has been making cars in the country since 1996.
General Motors Co’s Cadillac, which has relegated Toyota’s Lexus to fifth in luxury car rankings, opened a factory in Shanghai in 2016.
For Tesla, a tariff cut would provide a boon until the company manages to set up local production.
The Palo Alto, California-based frim has since last year been working with Shanghai’s government to explore assembling cars in China.
Last month’s announcement by Beijing that it would allow foreign new-energy vehicle makers to fully own auto factories as early as this year removed the primary hurdle in the way of Tesla founder and CEO Elon Musk.
In particular, high-end automakers would feel the effects of a tariff cut, because less of their production has moved locally.
For example, Lexus would benefit as the only premium Japanese marque that does not manufacture in China or has not announced plans to do so.
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