High-End Buyers Unfazed By Government’s Tax Increase, Pushing Luxury Brand To Higher Sales Figures
If Porsche’s top executives were concerned last year when the Chinese government imposed a higher tax on high-end imported European vehicles, they can now breathe a sigh of relief, as sales figures indicate that the tax hike did nothing to slow Porsche’s growth in the mainland — and actually may have had the opposite effect. Among China’s business elite and/or nouveau riche circles, conspicuous consumption has become a way of life, and as such owning a car for which you had to pay upwards of $35,000 in import taxes alone is a good way to flaunt your cash.
As the Globe and Mail points out today, China’s import tax seems to benefit all parties involved — from the car companies who are recording record profits in China, to the government offices collecting mountains of tax revenue, to the conspicuous consumers cruising around Beijing or Shanghai in their pricey sports cars:
Shortly after the Beijing Olympic games last summer, the Chinese government slapped a hefty luxury tax on imported European cars with high-horsepower engines. Klaus Berning, the Porsche executive vice-president of sales and marketing who attended the Frankfurt Auto Show, said the tax added $35,000 (U.S.) or more to the price of a Porsche.
Sales should have plunged. Instead they rose, much to the delight of both Porsche and, no doubt, the Chinese treasury. In the year to the end of July, Porsche sold 7,708 cars in China, up 1.5 per cent from the previous year. In August, Porsche sold 1,000 cars in China, putting sales on track for a blockbuster year (Porsche’s global sales are 80,000 to 100,000 a year). “We’re getting amazing orders there,” Mr. Berning said.
Porsche attributes the rise to the reviving Chinese economy, an increasing number of wealthy people and relentless demand for status-symbol Western products.
Mr. Berning said no amount of tax seems to hurt luxury car sales in China. When the luxury tax is added on top of the import taxes and other Chinese taxes affecting cars, tax represents about 75 per cent of the sales price of a Porsche.