Up to 1.43 Million Won Reduction... Will the Car Industry Benefit from the Excise Tax Cut?

[Asia Economy Reporter Kiho Sung] The automotive industry, which has been struggling due to the novel coronavirus infection (COVID-19) crisis, has received a boost with the reduction of the individual consumption tax. As the government extended the passenger car individual consumption tax, which ended at the end of last year, and more than doubled the reduction rate, the price of domestic cars is expected to drop by up to 1.43 million KRW.

According to the automotive industry on the 1st, after the government decided to reduce the individual consumption tax at the Economic Vitality Measures Meeting on the 28th of last month, each company began revising the prices of vehicles for sale.

The government decided to reduce the individual consumption tax from 5% to 1.5%, a 70% cut, for passenger car purchases from March to June. Accordingly, buyers can receive a maximum exemption of 1 million KRW for individual consumption tax, 300,000 KRW for education tax (30% of the individual consumption tax), and 130,000 KRW for value-added tax (10% of the sum of individual consumption tax and education tax), totaling up to 1.43 million KRW.

Following the news of the individual consumption tax reduction, each company is also lowering prices one after another. SsangYong Motor announced on the same day that it would reduce vehicle prices by at least 730,000 KRW up to 1.43 million KRW.

The G4 Rexton’s price will be reduced by up to 1.43 million KRW, from 35.04 million to 44.98 million KRW down to 33.61 million to 43.55 million KRW, and the Korando gasoline model will be lowered by 980,000 to 1.19 million KRW depending on the trim, priced between 22.01 million and 26.88 million KRW.

Especially, the Tivoli gasoline, popular among women, is expected to benefit from an individual consumption tax reduction effect of 730,000 to 1.02 million KRW, with prices ranging from 16.37 million to 22.97 million KRW.

Korea GM also implemented price reductions ranging from 770,000 to 1.43 million KRW depending on the model. The newly popular Trailblazer’s starting price dropped from 19.95 million KRW to 19.10 million KRW, and for the most popular premium trim RS model, the price is reduced by more than 1.1 million KRW.

The New Malibu sees price cuts of 1.02 million to 1.42 million KRW, Equinox 880,000 to 1.19 million KRW, and the New Trax 770,000 to 1.06 million KRW. The Traverse and Camaro SS receive the maximum reduction benefit of 1.43 million KRW.

Renault Samsung also lowers vehicle purchase costs by up to 1.43 million KRW due to the individual consumption tax reduction.

The SM6 is available at a reduced price of 929,000 KRW to 1.43 million KRW, and the QM6 is reduced by 1.03 million to 1.43 million KRW. The new XM3, scheduled for release on the 3rd and whose price has not yet been announced, is expected to see a price reduction effect of around 700,000 KRW from the originally set price.

Hyundai and Kia vehicles across all models also benefit from a maximum price reduction of 1.43 million KRW.

The automotive industry expects that the individual consumption tax reduction will help promote vehicle sales amid difficulties caused by COVID-19. An industry official said, "The reduction rate of the individual consumption tax is more than twice the previous level," and added, "It will have the effect of encouraging customers who were hesitating to purchase vehicles to make a decision."

This content was produced with the assistance of AI translation services.