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Auto Tariff Reductions May Lead to Price Cuts
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China's further reductions of import taxes on some cars and auto parts as of July 1, may lead to a new wave of auto price cuts in the second half of this year, China Securities Journal reported Monday.


The three-percent tariff reduction will provide more opportunities to offer price cuts amidst fierce competition, the newspaper cited Zhang Xin, an auto-market analyst with Guotai Junan Securities, as saying.


Besides, the first half of a year generally tends to see more car sales than the second half of the year, Zhang said noting that due to this, price cuts are frequently used by manufacturers for sales promotion in the latter part of the year.


The cuts on import taxes of auto parts will reduce the import cost of major parts for domestic auto manufacturers, which will certainly have some effect on the prices of domestic cars.


For China's imported autos, tax cuts in July will result in a policy amendment rather than having any major effect, as a three-percent decrease is really a small adjustment, insiders said, adding that factors like foreign exchange rates and the market situation have more effect on auto price fluctuations than tax cuts.


To fulfill its commitments on tariff reduction upon its entry into the World Trade Organization (WTO) in 2001, China has lowered the tariffs on cars, SUVs (sports utility vehicles or cross-country vehicles), and mini-buses from 28 percent to 25 percent, as of July 1.


Meanwhile, the import taxes on auto parts, such as auto bodies, underpans, medium and low emission gasoline engines, will be reduced to 10 percent from a range between 13.8 percent and 16.4 percent.


(Xinhua News Agency July 4, 2006)


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