Gray Market for Import Vehicles

[Randy W]

Gray imports

 

Importers have to pay several different taxes for vehicles imported to China, including a 25 percent tariff, a consumption tax based on engine displacement, a 17 percent value-added tax and an approximate 10 percent purchase tax.

In addition to these taxes, high dealership profits further increase the price of imported cars in China.

An SUV with 3.0 liter engine displacement, which is priced at $60,900 in the US, should cost nearly 780,000 yuan after all taxes in China are paid. However, prices set by dealerships in the Chinese market run as high as 1.24 million yuan, The Chongqing Morning Post newspaper reported in August 2013, noting the profit rate for luxury cars in China is close to 37 percent, significantly higher than the 20 percent industry standard.

Purchasing cars from overseas

The price gap between China and the US has created a shady sub-sector dedicated to purchasing cars from overseas.

 

. . .

 

Each US citizen who works in China can legally import a second-hand car from the US. However, not everyone does that. Therefore, these trading companies buy the quota from them, he said, refusing to reveal the price of a quota.

With these quotas, the Chinese trading companies can then import second-hand cars, only needing to ensure these vehicles meet 3C requirements in China. They can then be sold for profit, the insider said, noting the trading companies can earn at least 100,000 yuan for each car.

The price of these imported cars can be 10 percent lower than the official price in the Chinese market because dealership profit is less than that of 4S shops, Dai said.

Buyers of these imported cars also face some risk, mainly when it comes to repairs, Wang Cun, a marketing manager at China Automobile Trading Company, told the Global Times Tuesday.