China will raise tariffs on some automotive parts from April, according to new government rules that are expected to raise costs for such foreign players as Volkswagen and General Motors, Reuters reported.
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From April 1, importing all of a vehicle’s parts would incur the tariff imposed on assembled vehicles, not the lower one that applies to parts, according to rules published on the customs bureau’s Web site, the report noted, adding that analysts say importing a vehicle attracts an average tariff of 30% while the tariff on parts is 15%.
Vehicles partly assembled [semi knocked down or SKD] before being brought into China would also attract the higher rate, the bureau reportedly said, as would importing a combination of major assemblies, such as the chassis and engine.
Reuters said that joint ventures between foreign and Chinese car makers often rely on [SKD or completely knocked down (CKD)] methods, even though they have been gradually using more domestically made parts.
“Sino-foreign joint ventures need to import CKD and SKD kits particularly when they push out new models,” auto analyst Shi Zhonghua at China Securities told the news agency – local parts are substituted later.
“So the new rules will have an impact on such ventures, though the tightening mainly targets plants that are merely performing assembly,” he reportedly said.
The rules will tighten further on July 1, when importing 60% of a vehicle’s parts, by value, would attract the higher tariff, Reuters said, citing the bureau’s Web site.
Xu Xiang, a senior auto analyst at China Southern Securities, told the news agency the government was trying to prop up the domestic industry, which is suffering from unexpectedly slow growth, and promote its technical development.
“By setting this restriction, the government will clamp down on what it deems unfair competition,” Xu reportedly said, adding: “The move will encourage home-grown companies to do more research into technological improvements, instead of just acting as assembly plants.”
Reuters noted that China has pledged to slash tariffs on imported vehicles to 25% by July 2006 as part of commitments it made on joining the World Trade Organisation.
Wednesday’s move is Beijing’s latest effort to foster a viable local auto industry, now dominated by foreign cars, the report noted, adding that a government policy announced in June sought more technical innovation at Chinese auto companies, with the hope of incubating international brands that could eventually compete overseas.
