China luxury car tax slashes sales for German premium automakers

A year after China lowered the luxury‑car tax threshold from 1.3 million yuan to 900 000 yuan (about €116 000), the measure has hit German premium brands hard. The VDA said the change “predictably had a particularly negative impact on European, especially German, manufacturers” because it targets high‑value vehicles. German makers such as BMW, Mercedes‑Benz, Audi and Porsche now face a choice between raising prices – which would weaken competitiveness – or absorbing the cost, cutting margins.

According to Cui Dongshu of the China Passenger Car Association, demand for combustion‑engine cars priced between 900 000 and 1.3 million yuan has fallen sharply. Consumers are turning to Chinese premium EV or hybrid models and to cheaper used luxury cars. The tax adds pressure to an already weakened market that has been affected by a property‑price slump and shifting consumer preferences, and it further strains EU‑China trade relations.