(Yicai) Oct. 13 -- China will lower the export tax rebates for new energy vehicles from next April. Experts said the move will help curb low-price competition overseas, encouraging Chinese carmakers to move away from low-margin expansion and focus on technology and product quality.

Value-added tax rebates on China-made NEV exports will drop to 9 percent from 13 percent from April 1 next year, the Ministry of Finance and the State Taxation Administration jointly announced yesterday. The export consumption tax rebate will remain unchanged at 13 percent.

Industry insiders believe that the move will not reverse the overall upward momentum in Chinese NEV exports, but it will indeed raise export costs for some manufacturers.

The adjustment comes with a long transition period and marks a return to policy neutrality after the industry’s maturation, Cui Dongshu, secretary-general of the China Passenger Car Association, told Yicai. It will also help curb involution-style competition overseas and manage the risk of trade frictions, pushing carmakers to compete on product quality rather than price, he added.

The 4 percentage point rise in costs will affect low-end, thin-margin NEV models the most, while higher-end ones will better withstand the impact, Cui said. In the short term, exports of low-end, volume-driven models may drop, but higher-value-added models from leading brands and the release of localized overseas production will keep overall exports growing, he pointed out.

Overseas markets tend to regard export tax rebates as industrial subsidies, so this adjustment will help ease trade frictions, Li Yanwei, an expert at the China Automobile Dealers Association, told Yicai. Carmakers with mature overseas service networks and solid brand reputation have room to raise prices to offset the added costs, he noted.

Meanwhile, automakers that rely on low prices to achieve sales and lack differentiated products have little pricing power, so raising prices could cost them orders, which means that they will have to absorb the added costs themselves, Li explained. Whether a company can successfully raise prices will mainly depend on its overall competitiveness, he added.

China exported 7.067 million passenger cars in the first nine months of the year, up 75 percent from a year earlier, according to data released by the CPCA yesterday. New energy passenger vehicle exports surged 139 percent to 3.887 million units in the period, with the figure for September up 164 percent to around 558,000 units.

Chinese carmakers’ exports to the European Union more than doubled to about 777,000 vehicles in the first seven months of the year from a year earlier, CPCA data also showed.

In August, the Ministry of Commerce and two other Chinese departments issued guidelines on overseas competition in the automotive industry, urging companies to avoid frequent and sharp swings in suggested retail prices abroad.

Editor: Futura Costaglione