Imported Cars Also Could Not Escape the 'Excise Tax Cliff' in July

19,778 New Imported Cars Registered in July
27.7%↓ MoM Due to Reduced Excise Tax Cut Impact

New Tiguan (Photo by Volkswagen Korea)

[Asia Economy Reporter Kim Ji-hee] The domestic imported car market, which had been thriving thanks to the individual consumption tax reduction effect earlier this year, faltered last month. As the benefits of the individual consumption tax cut decreased starting in July, the growth trend that had continued for five consecutive months compared to the previous month appears to have been broken.

According to the Korea Imported Automobile Association (KAIDA) on the 5th, the number of newly registered imported passenger cars last month was 19,778 units, a sharp drop of 27.7% compared to the previous month. After steadily maintaining an increase rate of around 10% month-on-month since February this year, sales declined for the first time. Compared to the previous year, sales increased by more than 40% in June, but in July, the increase was limited to 1.7%.

Except for Nissan’s premium brand Infiniti, which is liquidating inventory ahead of its planned withdrawal from the domestic market by the end of this year, most brands saw sales turn downward. German brands, which had dominated the imported car market throughout the first half of this year, showed the same trend. Mercedes-Benz recorded 5,215 units, a decrease of over 30% compared to the previous month, and BMW, ranked second, recorded 3,816 units, down 6.2%. Audi and Volkswagen saw year-on-year sales increases due to the base effect of last year’s 'temporary closure' status, but both showed double-digit sales declines compared to June. Chevrolet (1,106 units), Volvo (1,069 units), Porsche (914 units), Lexus (749 units), Mini (629 units), and Toyota (520 units) also all experienced sales declines compared to the previous month.

The upward trend in the imported car market seems to have been halted due to the reduction of the individual consumption tax cut benefits starting in July. Previously, the government temporarily reduced the individual consumption tax rate applied to new car purchases from 5% to 1.5%, a 70% cut, but from last month, it was increased to 3.5%. However, since demand surged in May and June ahead of the reduction in the tax cut effect, the imported car market is still considered to be relatively stable.

Im Han-gyu, Vice Chairman of the Korea Imported Automobile Association, explained, "The new registrations of imported passenger cars in July decreased compared to the previous month due to supply shortages of some brands and changes in the individual consumption tax reduction rate."

Meanwhile, concerns that the revised individual consumption tax reduction policy would only boost sales of high-priced imported cars did not materialize significantly in July. Initially, the government faced criticism for removing the maximum reduction limit of 1 million KRW while reducing the tax cut rate, which meant that vehicles priced above 76.67 million KRW (with a factory price of 67 million KRW) would receive greater benefits than before. However, in the first month after the tax cut policy change, sales of premium high-priced brands actually decreased compared to the previous month. Porsche, whose prices for most models exceed 100 million KRW, saw sales drop slightly from 940 units in June to 914 units. Supercar brands Bentley and Rolls-Royce, with sales prices over 300 million KRW, also fell by 34.4% and 33.3%, respectively, compared to June.

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