It doesn't need to be. Let's say it's taxed at 25%, then €10,000 of equipment costs €12,500 after the import fees, if I install that €10,000 of equipment in a shitty €1,000 car I've effectively got a €1,500 discount on the equipment and a free car to sell for scrap.

That's fraud, because that car would then be worth €11000 and should be taxed as such.

You think nobody tried to undervalue taxed imports yet? Probably a fraud as old as mercantilism.

No, it's not fraud. Yes the car is now worth €11000, but it's not taxed on its ticket price, it's taxed on what it is. It's a car, and a car includes seats, a car stereo (albeit now a very expensive one), an engine etc.

Nobody's trying to undervalue the car as costing €1,000 with a €10,000 stereo, that would be fraud.

The point is that by introducing differences in what sort of taxes you have to pay for certain products you trivially open yourself up to legal tax evasion in the form of simply bundling higher cost items as part of products in lower tax categories.

Perhaps a better example: Let's say you have a 200% tax on cylindrical metal tubes, but a 10% tax on bicycles. A lot of people would now legally import bicycle frames, cut them apart, and evade the import fees without the authorities being able to do anything about it. There's nothing illegal about buying a bicycle frame, and there's nothing illegal about cutting apart your bicycle and re-using it for parts.

Ah, I see where the confusion comes from. You mean when the audio equipment is taxed higher than the car.

I think OP did not mean "put 0 tax on cars" but rather remove the extra 100% tax on cars, so it's just taxed like any other product - i.e. just the same as tax on audio equipment. Then it would not matter.