China's Finance Ministry said that it will cut import tariffs on some vehicles to 15 percent, down from as much as 25 percent.
The announcement Tuesday also said that tariffs on some automotive parts would fall to 6 percent. The cuts will be effective from July 1.
The move signifies an attempt to open up the world's largest auto market to international players. Discussion of a potential automotive sector tariff cut surfaced in April, and was mentioned in a speech by Chinese President Xi Jinping that month. It was also revealed that China would permit full foreign ownership of car makers in five years.
According to the Finance Ministry on Tuesday, the average tax on qualifying vehicles will now be 13.8 percent. Car parts to have import duties lowered include bumpers, doors and seat belts.
The European automotive sector was trading up just over 0.7 percent Tuesday morning, with German parts maker Schaeffler leading the way. Higher-end car makers could stand to benefit from the decision, given that less production for these models has shifted to China. Toyota's Lexus could do well, given it currently does not make its cars in China and has not announced any plans to move manufacturing into the country.