Reduced tariffs applying to imports will put (and are already putting) downward pressure on retail prices in China, according to Chinese media reports.
China is to cut its import duty on passenger cars to 15% from 25%, effective from 1 July.
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China currently charges an import tariff on finished vehicles of 25%.
Reports say auto companies, including Volvo, Audi, Lexus and Mitsubishi, have announced plans to reduce vehicle prices significantly.
Import tariffs on 79 auto parts will also be reduced to 6% from the current levels of 8-25%.
Analysts said the pricing adjustment of imported vehicles will pose challenges for Chinese auto brands as they are expected to further lower prices to cope with the competition.
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By GlobalDataWhile China's near 30m pa car market is mainly met by local production and joint ventures, it still imported over 1.2m vehicles last year.
The tariff reduction is expected to benefit those makers without major manufacturing operations in the country.
Last week Tesla was reported to have slashed up to US$14,000 off its Model X in China. The carmaker will lower prices of its Model S and Model X cars by just over 6%, a Beijing based sales representative told Reuters.
Tesla said any of its cars sold in China would be subject to adjusted prices, even before the tariff change comes into effect on 1 July.
