Taiwan’s car market faces tariff and tax challenges

TAIPEI (TVBS News) — A French car brand has generated significant interest in Taiwan's automotive market, accumulating over 600 orders since its July launch. The brand's competitive pricing and exceptional design have captivated consumers, offering two models starting at NT$1.198 million (around US$40,350) and NT$1.298 million (around US$43,700), respectively.

However, imported car pricing remains sensitive to potential tariff changes with the United States. With the Aug. 1 negotiation deadline approaching, uncertainty over car taxes continues to loom over the market. Wu Rui-hung (吳睿弘), an auto group's CEO, noted that the pricing aligns with Taiwan's typical midsize SUV budget range of NT$900,000 to NT$1.3 million (around US$30,300 to US$43,800). 

This strategic positioning places the new vehicles favorably against competitors like the Ford Kuga and Honda CR-V, priced from NT$949,000 to NT$1.299 million (around US$32,000 to US$43,700) and starting at NT$1.059 million (around US$35,700) respectively. Despite promising prospects, Taiwan's car market faces significant challenges. Wu highlighted that the market ranges between 400,000 and 450,000 vehicles annually, with increasing pressure from ongoing price wars.

Taiwan's intricate tax structure significantly impacts vehicle prices. Imported cars face a 17.5% tariff, 25% or 30% commodity tax, 5% business tax, 0.04% trade promotion fee, and 10% luxury tax. Removing tariffs could lower import prices but increase pressure on local brands, potentially hindering sustainable development.

While domestic cars are exempt from tariffs, they incur component tariffs ranging from 0% to 17.5% alongside other taxes. Deputy Minister of the Ministry of Economic Affairs (MOEA, 經濟部), He Chin-tsang (何晉滄), stated that the government has prepared resources, as the Legislative Yuan (立法院) recently passed a special act with a NT$46 billion (around US$1.55 billion) budget to help industries cope with tariff impacts.

Meanwhile, customs warehouses overflow with vehicles awaiting delivery amid sluggish market conditions and unresolved tariff issues. The MOEA has denied plans to adjust commodity taxes, which could disadvantage domestic car competitiveness. The ministry considers extending tax reductions for trade-in vehicles and lowering tariffs on parts not manufactured domestically to counter U.S. import car price competition.

Tung Chien-chiang (童建強), a senior executive officer at the ministry's Industrial Development Administration (產發署), revealed ongoing communications with car manufacturers and associations. These stakeholders worry that reduced import tariffs could weaken domestic competitiveness.

Taiwan has not yet received notification from the Trump administration regarding specific tariff rates. Uncertainty continues to hover over Taiwan's automotive market, creating volatile pricing dynamics. Consumers anticipate lower prices, while domestic industries prefer the opposite outcome.