BMW, Mercedes-Benz lower costs in China after VAT drop

BMW M550i at Detroit Auto Show

BMW AG and Mercedes-Benz stated on Saturday they are going to reduce their prices in China, following the government declaration it will decrease the country’s value-added tax (VAT) beginning on April 1.

The German automakers each published posts on Chinese social media announcing immediate cost cuts for several models. The discounts come as China endures a slumping market for automobiles as the economy slows.

BMW said it would decrease prices for both domestically produced and imported models, consisting of the locally-made BMW 3 series and BMW 5 series, along with the BMW X5 and BMW 7 import models. The BMW 320Li M model is going to sell for a suggested retail price of 339,800 yuan ($50,620), a fall of 10,000 yuan from its original price.

The decreases mark the company’s “active response to the national VAT adjustment notice,” BMW stated in a post on WeChat, China’s popular messaging app.

Daimler AG-owned Mercedes-Benz declared similar price decreases on a range of its cars, also effective immediately, in advance of the upcoming VAT drop. The cuts indicated on its social media page range from 10,000 yuan to 40,000 yuan on select models.

On March 5, Chinese Premier Li Keqiang announced that China will cut VAT across a range of industries, with the tax set to decline in the manufacturing sector from 16 percent to 13 percent and in the transport sector from 10 percent to 9 percent.

The automakers’ cuts come as China’s automobile industry deals with a major slowdown. In 2018, China’s car market declined 5.8 percent, marking its first contraction in more than two decades.

Policymakers have introduced a series of policies to stimulate demand for vehicles. In January, China’s National Development and Reform Commission (NDRC) stated it would loosen restrictions on the second-hand auto market and provide subsidies to increase purchases in rural regions.

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