Chinese Cars Cost Twice as Much in Israel Due to Taxes and Markups

New Chinese cars sold in Israel are significantly more expensive than in their country of origin, often costing double or more. For example, the updated Geely E5 (previously sold as EX5 in Israel) starts at approximately $14,400 in China, while its Israeli price begins at around $43,000 (161,990 shekels). Even the most expensive Chinese version is only about $17,000 to $18,000. This price disparity is evident across various models, including the XPeng G6 and BYD Seal 7, which are considerably cheaper in China.

A major factor contributing to the price difference is Israel's taxation system. Electric vehicles face a 48% purchase tax, capped at a benefit of 22,000 shekels compared to regular vehicle taxes. Cars from China also incur a 7% customs duty, followed by VAT. A vehicle valued at 90,000 shekels upon arrival could reach 140,000 to 150,000 shekels before importer costs and profit.

Beyond taxes, importers incur additional expenses such as shipping, storage, regulatory compliance, extended warranties (six to seven years), spare parts inventory, service centers, marketing, and financing. Furthermore, export models may differ from those sold domestically in China, with variations in battery, safety systems, and features.

Despite these factors, importer financial reports indicate profitability. For instance, Crasco Motors reported significant revenues and net profit in 2023, with a return on equity of 15.5%. Universal Motors also showed strong profits and distributed substantial dividends. Importers' reported profit margins can appear lower because they are calculated on prices that include taxes, which are essentially passed on to the state. When taxes are excluded, the importer's share of the sale is higher.

The substantial price gap also explains the prevalence of discounts in the Israeli market. While Chinese car prices might drop by 10-15% in China, these reductions are not immediately reflected in Israeli price lists. Over time, importers and manufacturers gain more flexibility to offer discounts, subsidized financing, or improved features, leading to a gradual trickle-down of price competition.