Nantong Jinchao Machinery Co., Ltd. , https://www.ntjinzhaomachine.com
On March 30, the European Union and the United States jointly lodged a complaint with the World Trade Organization, and raised doubts about China’s “Measures for the Administration of Imports of Auto Parts that Constitute the Characteristics of Complete Vehicles†(hereinafter referred to as the “Measuresâ€), requesting that China revise its tariff policy on auto parts as soon as possible. Let go of the spare parts market. If the three parties cannot reach a consensus after the 60-day consultation period, the World Trade Organization will send a panel of experts to hold a hearing on the dispute and make a ruling.
The “Measures†that have been implemented since April 1 last year stipulate that domestic automobile companies will be able to assemble vehicles with imported spare parts and semi-parts, and use two imported assemblies for the body and engine to load vehicles. The total of imported parts prices has reached or exceeded When the total vehicle price is 60% and other conditions, it is verified that the imported components constitute the characteristics of the vehicle and the tariff will be levied at the rate of the imported vehicle. The European Union and the United States believe that this move is in fact equivalent to disguising the "localization rate" of parts and components, in violation of the relevant provisions of the World Trade Organization, and also against the "repeal of all localization requirements" and "reduction of automobile zero." Commitment to parts tariffs.
Wu Jiahuang, deputy head of the China World Trade Organization Research Association of the Ministry of Commerce, said in an interview with reporters that China did not violate its commitments. After joining the World Trade Organization, China has already amended its investment laws through the legislature and no longer localizes automobile production. Mandatory requirements; while also reducing the tariffs on cars and parts, the current vehicle tariff is 28%, in July will be reduced to 25%, parts and tariffs have dropped to 10%. Wu Jiahuang believes that the "measures" are mainly formulated to prevent certain multinational corporations from using tax rates to evade taxes.
Since 2001, when China joined the World Trade Organization, the demand for cars in the Chinese market has soared. Due to the great difference in import tariffs on complete vehicles and parts and components, the import of spare parts from foreign countries has been assembled and produced in China. This has become a way for many companies to “get short and fastâ€. , and ways to make money and tax fraud. The issuance of the "Measures" has effectively inhibited the assembly of CKD and reduced the loss of revenue. It is understandable. The World Trade Organization also allows developing countries to protect their potential pillar industries, and supports them in formulating relevant policies to create a fair and equitable competitive environment.
In fact, the EU and the United States have joined forces to exert pressure on China, which has deep-seated reasons. For those European companies accustomed to CKD, it is difficult to realize the localization of the core components. At present, the tariff rate for parts and components is 10%. In July, the vehicle tariff will be reduced to 25%, which constitutes a 15% tax rate difference, and the difference in tax rate is the net profit that the company will lose. Suppose a car has 60% of the total price of components imported from abroad. If the cost of the car is 100,000 yuan, the original tax is 6,000 yuan; after the tax is imposed on the vehicle, it is required to pay 15,000 yuan. , Enterprises increased the cost of about 9,000 yuan. Assuming that 100,000 vehicles are produced and sold in one year, the loss of one year's profits is 900 million yuan. If it is a luxury car, the proportion of imported parts may exceed 90%, and the loss will be even greater. This leads to higher cost of the assembled vehicle and lower profits; the more you sell, the more you lose.
For newly-introduced European luxury car manufacturers, since they chose to produce in China, they would have to open up price differences with imported models, and the implementation of the "Measures" has caused them to dilemma. From BMW to Mercedes-Benz to Volvo, which has just announced that it is domestically produced, while emphasizing globally uniform quality, it has to face the reality that a large number of parts and components must be imported to pay vehicle tariffs. On the one hand, Chinese component manufacturers cannot meet their quality requirements in a short period of time; on the other hand, it is necessary to persuade European component suppliers to set up factories in China, and it takes considerable effort to supply them without seeing the best-selling products. Businessmen will not risk. As the implementation of the "Measures" led to a sharp decline in the profits of European companies, the EU will not be difficult to explain this big move.
On April 1 this year, China has also made significant adjustments to the automobile consumption tax. The rate of cars with a displacement of 3.0-4.0 liters is 15%; if it exceeds 4.0 liters, the tax rate is increased to 20%. On the eve of the implementation of the new excise tax, more than 20 auto companies, including Beijing Benz, have also petitioned the relevant authorities to protest. The implementation of this series of policies is no exception for luxury car manufacturers.
In this appeal, the EU is undoubtedly the main player, while the United States acts as an assist. The process of localization of American companies in China is actually quite fast. In addition to the direct impact of Cadillac as a luxury car, the pressure of American companies in China is much lower than that of European companies. The reason why the United States wants to serve as an allied force for the EU is actually its wishful thinking. As we all know, the three major automobile companies in the United States have been experiencing precarious conditions due to serious losses, and those parts and components companies that are closely related to them have not eaten as a result. In order to support its own parts and components companies, the US government is ready to seek opportunities in overseas markets, and China is undoubtedly their life-saving straw.
According to U.S. government statistics, its trade deficit with China in 2005 reached US$2.1 billion, an increase of 20% over 2004. This year, the value of China’s imports of auto parts from the United States was only US$542 million, while during the same period the US’s value of parts imported from China reached US$3.2 billion, which is obviously something the United States does not want to see. If the appeal is successful, China will change its tariff policy on auto parts. The United States is likely to export parts to China in large quantities to feed those hungry parts and components manufacturers.
Relevant persons believe that China is less likely to make concessions for this purpose. At best, it loosens certain “difficult households†during policy implementation, for example, a certain grace period for certain newly-entered companies. After being made by Mercedes-Benz, China has promised to give it a one-year grace period on the import tax rate for parts and components. Mercedes-Benz, on the other hand, hopes that the government can extend this deadline. For those mid-to-low-class car companies with relatively large market shares, there is no need to open up their networks. Because if a policy is too loose, there will inevitably be fluctuations in the localization of companies, it is difficult to say that the wind of CKD assembly will not return. After all, imported parts assembly is both easy and safe. Even those car companies that have invested a lot of support can hardly guarantee that they will not repeat the same mistakes driven by interests.
In fact, localization is an inevitable trend in any market in the world. Especially in such a highly competitive market like China, it is even more necessary to move steadily and take localization. The EU and the United States complained to the World Trade Organization precisely because they only saw short-term interests and they did not have a long-term perspective. When European and American companies were defeated by Japanese and South Korean companies in their hometowns, they did not realize that in the Chinese market, these Asian opponents who are good at localization have greater lethality. Those European and American companies that are keen to earn huge profits from imported components will pay a huge price in the near future.
December 14, 2022