BMW and Mercedes-Benz lower prices in China after VAT cut

SHANGHAI (Reuters) – BMW AG (BMWG.DE) and Mercedes-Benz announced Saturday that they would lower their prices in China after the government announced the reduction of the country's value-added tax (VAT) as of April 1.

German automakers have each published Chinese social media articles announcing immediate price cuts for several models. The cuts come as China suffers a shrinking market for automobiles as a result of the economic downturn.

BMW said it would reduce the prices of domestically produced and imported models, including domestically produced BMW 3 series and BMW 5, as well as imported BMW X5 and BMW 7 models. The BMW 320Li M model will be sold at a suggested retail price of 339,800 yuan ($ 50,620), a decrease of 10,000 yuan from its original price.

The cuts testify to the company's "active response to the national VAT rectification notification," BMW said in a message posted on WeChat, the popular messaging application in China.

Owned by Daimler AG (DAIGn.DEMercedes-Benz has announced similar price cuts on a range of its vehicles, also as of now, before the upcoming VAT cut. The discounts shown on his social media page range from 10,000 yuan to 40,000 yuan on some models.

On March 5, Chinese Premier Li Keqiang announced that China would reduce VAT in several sectors. The tax is expected to fall by 16 to 13% in the manufacturing sector and by 10 to 9% in the transport sector.

The car manufacturers' cuts come as the Chinese auto industry faces a major slowdown. In 2018, the Chinese car market fell by 5.8%, marking its first contraction for more than two decades.

Policymakers have put in place a series of measures to boost demand for cars. In January, China's National Development and Reform Commission (NDRC) announced that it would ease restrictions on the used car market and provide subsidies to boost procurement in rural areas.