China Used-Car Dealers Ask for Tax Cut as Market Slump Continues

(Bloomberg) -- China’s used-car dealers asked the government for a tax cut as a sales slump continues in the world’s largest auto market.

The China Automobile Dealers Association asked the finance ministry to charge the 2% value-added tax only on the difference between a used car’s selling price and a dealer’s purchase cost, the Beijing-based group said in a proposal dated June 14 and sent to media Monday. Currently, dealers are taxed on the total selling price.

Alternatively, the government could offer dealers a three-year VAT rebate before 2023, said CADA. A dealer’s average gross profit margin on a used car is about 3%, the association said.

China’s car sales fell for the 12th consecutive month in May. CADA argues the tax on used-car sales is holding dealers, and the market, back. While sales of second-hand cars in China has soared almost 20-fold to more than 13.8 million since 2002, only 10% of those are handled by manufacturer-certified dealers. In the U.S., 35% of used cars are traded via second-hand dealers, CADA said.

©2019 Bloomberg L.P.

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