Chinese buyers rush for luxury cars to beat new levy

Bloomberg News

Super-luxury car dealers in China made calls to their best prospects Wednesday evening, urging them to buy before the clock struck midnight to avoid paying extra taxes on the gilded rides.

Some distributors sold as many cars that night as they deliver in three months, as buyers sought to beat the implementation of a 10 percent levy on vehicles costing more than 1.3 million yuan ($189,000) before a value-added tax, according to Wang Cun, an official at the China Automobile Dealers Association.

The new levy — on cars like the Ferrari GTC4 Lusso, Bentley Bentayga and Aston Martin DB9 — was meant to “guide reasonable consumption,” lower emissions and save energy, China’s finance ministry said in a statement posted on its website around the dinner hour.

While the additional cost will be a limited deterrent for people willing and able to spend vast sums on a car, it’s another drag on these vehicles just as they were showing signs of recovery amid President Xi Jinping’s calls for thriftiness. It also comes as the government considers extending a tax cut on smaller cars due to expire this month.

“The tax increase is a display of the government’s attitude of advocating frugality,” said Cui Dongshu, secretary-general of the Passenger Car Association. “The increase in taxes on luxury cars may help make the extension of the small-car tax cut more likely given it is in line with the government policy of promoting cars with better fuel economy.”

Manufacturers of ultra-luxury vehicles have been shifting their lineups in recent years to appeal more to Chinese buyers, who generally prefer large autos over sports cars. Rolls-Royce and Aston Martin are both planning their first SUVs, following Bentley’s lead with the Bentayga, which starts at 3.98 million yuan in China.

Lamborghini SpA, which counts Greater China as its second-biggest market, sold more than 2,000 vehicles through June this year, a record tally for the carmaker. The Italian supercar maker also is planning to begin sales of the Urus SUV in 2018. A BMW spokesman said the carmaker was still evaluating its business.

Gaydon, England-based Aston Martin Lagonda Ltd. “constantly adjusts to specific conditions in the markets in which we do business, and will do so for this taxation change in China,” a spokesman said by email. A spokesman at McLaren Automotive Ltd. declined to comment beyond saying the Woking, England-based carmaker was aware the Chinese government had been considering the move.