Export Tax Rebates Cut by 4 Percentage Points, Will Car Buyers Pay More Next?

The Ministry of Finance issued this notice, causing quite a stir in the circle of car companies going overseas. The 4 percentage point cut in the export tax rebate rate may not look like a big number, but for car companies relying on low prices and high volume, it can truly swallow up half a year's profits.

Don't underestimate this 4%. Many independent brands focusing on Southeast Asia, the Middle East, and Latin American markets have a net profit of only 5 or 6 percent per exported car, following a strategy of thin profits and high turnover. The tax rebate rate dropping from 13% to 9% means the policy subsidy received directly decreased by one-third. Stripping away this portion, the profit per car is directly cut in half. Some entry-level volume cars that were already running on cost could potentially turn from micro-profits into losses. For them, this isn't a question of earning more or less; it's a matter of whether they can survive in this market.

Of course, it depends on who can withstand it. Companies like BYD, which control the supply chain tightly and have large export scales, can still absorb part of the cost through procurement and economies of scale, or share the price adjustment space with overseas dealers, so it won't be fatal. What they fear most are the SME brands that have just gone overseas for less than two years. They originally relied on low prices to capture the market, channels aren't stable, brand awareness is low. Raise prices and they lose orders; don't raise prices and they can't afford it, directly stuck in the middle with no way forward or back. They might even be forced to withdraw from some niche markets they just squeezed into.

But this matter shouldn't be calculated only in terms of money; one must also look at the policy trend. In previous years, the tax rebate rate was given high, encouraging everyone to stake out territory and seize the overseas market first; now lowering it, quite simply, means no longer encouraging going overseas by relying on low-price cutthroat competition. Relying on tax rebate subsidies to fight price wars will forever keep you wandering in the low-end market and easily attract anti-dumping investigations. The policy is forcing car companies to move up — don't always think about competing on price, compete more on products, brands, and premiums. Earning money with technical content is the long-term way.

Fuel vehicles didn't benefit from this dividend, nor did they suffer this blow. Originally, fuel vehicle exports were not large, nor were they the direction of policy support. This adjustment targets new energy vehicles precisely, aiming to cool down the rapidly growing export heat and squeeze out the excess. In the past two years, everyone rushed to go overseas, pushing prices down on each other. To grab orders, profit margins were thinner than paper. Exports looked like they were booming, but in reality, they made a name for themselves without making much money. Lowering the tax rebate rate just right washes out those players who relied on tax rebates to survive and had no core competitiveness.

In fact, visionary car companies started avoiding reliance on tax rebates long ago. Either build factories overseas for localized production, layout in multiple points like Thailand, Brazil, Europe, make locally and sell locally, avoiding tariffs and not being affected by export tax rebate fluctuations; or move towards the high-end, like NIO and Zeekr going overseas directly targeting luxury brands. The per-car profit margin is enough, that fluctuation in the tax rebate rate doesn't hurt the core. What they fear most are those who compete domestically then compete abroad, with no advantage other than cheapness. This wave just happens to hit them right in the crosshairs.

Short-term, this is growing pains, a batch of export players living on policy dividends will feel very uncomfortable; long-term, it is a good thing. Squeeze out the bubbles of low-level cutthroat competition, forcing Chinese car exports to shift from "quantity increase" to "quality improvement". Chinese cars cannot forever rely on policy subsidies to get by worldwide; sooner or later they must stand on their own feet with product strength and brand power. These four percentage points are both pressure and a turning point.