High taxes, profits mean high prices for Chinese cars

• Source: Global Times
• [11:50 December 10 2009]
• Comments

Meanwhile, the technology transfer fees also contributed to the high prices, according to Jia. In the most joint ventures between Chinese car manufacturers and foreign manufacturers, each side holds a 50 percent stake.

But Chinese partners usually have to pay technology transfer fees to their foreign partners and this usually accounts for 10 percent of the total cost of the car.

Analysts pointed out that besides the competition factor, taxes contributed a lot to the high prices.

An insider from BMW Brilliance Automotive explained why BMWs in China cost more than those in the US.

The imported BMW 740Li, which is sold at 1.16 million yuan in China will include 480,000 yuan in taxes, including import tariffs, consumption tax and vehicle purchase tax.

A Chinese industry source disclosed that even cars manufactured domestically also need to pay high taxes.

He disclosed that in the company he works at, the manufacturer needs to pay a 17 percent value-added tax, a 5 percent consumption tax in the process of production, and after the car was sold, the consumers need to pay a 9 percent purchase tax.

Meanwhile most states in the US, only have 5 percent to 10 percent taxes imposed on car manufacturers, and at most a 6 percent purchase tax.