China's auto industry joint venture mission completed?
The WTO trade disputes surrounding China's auto parts have also started a new wave. According to the dispute resolution procedures of the World Trade Organization, the DSB (WTO Dispute Settlement Body) announced the results of the deliberation last Friday. China has violated international trade rules in the collection of imported auto parts tax.
According to U.S. media reports, U.S. trade representative Schwab made it clear that "The World Trade Organization will not allow China to adopt discriminatory policies on U.S. auto parts."
The origin of the dispute--an industrial policy named "Administrative Measures for the Import of Auto Parts and Components That Constitute the Characteristics of Complete Vehicles" (hereinafter referred to as KD Management Measures) (the administrative agencies are the General Administration of Customs, the National Development and Reform Commission, the Ministry of Commerce, and the Ministry of Finance). In February 2005, it was stipulated that if the total amount of imported parts exceeds 60% of the total vehicle cost, the imported parts will be levied according to the import tax rate of the whole vehicle. However, the implementation date was extended from July originally scheduled for July to July 2008.
Since its establishment, this industrial policy has caused continuous disputes. In March 2006, the United States and the European Union believed that China's KD management measures violated WTO regulations and filed a lawsuit with the WTO. In April 2006, Canada joined the litigation camp. In February of this year, the DSB Dispute Settlement Committee released its interim report and said that it basically agreed with the lawsuits of the United States, the European Union and Canada. The Chinese side appealed that this trade dispute entered the WTO trade dispute resolution procedure.
Is China's KD management approach really a “no small bottleneck†for foreign companies that want to open up markets in China? For example, European and American countries have protested and played a role in protecting the Chinese auto industry. Through this dispute that has yet to reach a final conclusion, how should the Chinese auto industry, which already has the world's second-largest market, ponder?
Policy to promote the localization of high-end cars
"The main purpose of China's implementation of the KD management approach is to strengthen the localization of automotive core parts and components. In order to reduce the risk of high tariffs imposed and to increase their cost competitiveness, all foreign-invested automobile manufacturers have gradually increased localized procurement ratios. It can be said that KD's management measures have played a catalytic role in accelerating the localization of foreign-funded manufacturers, "says analyst at FOURIN Consulting.
Although the KD management method has not officially come into effect on the surface, it has already had a practical impact. According to FOURIN's statistics, with the proportion of KD-assembled vehicles produced in 2007, passenger cars accounted for 1.86%, down 4.6% year-on-year. Although the absolute number of KD-assembled vehicles in medium and large commercial vehicles increased, the overall average ratio decreased. 3.3%.
From the actual situation of foreign auto manufacturers, Audi, BMW, Mercedes-Benz, Volvo and other high-end car manufacturers have begun to expand the production scale of high-end cars in China in response to KD management measures. According to FOURIN analysts, the reason is that the production volume of high-end vehicles is still small compared to other production models, resulting in an average localization rate of 40% or less. It is expected that the scale of product support will continue to expand in the future. ""
In January 2008, BMW Chairman Alfred Rupp announced that almost all components except for engines, some electronic components, and axle brackets can be purchased locally in China. Volvo expects to start production of the extended version of the S80 in 2009. The initial localization rate will reach 40%. Toyota also said that if Lexus' annual sales volume in China reaches 30,000 to 40,000 vehicles, it may consider localization.
The tendency of the sole proprietorship of parts and components companies
When foreign giant companies decide to increase their supporting scale in China, without exception, they first consider promoting international suppliers for themselves to enter the Chinese market. Taking Mercedes as an example, in the foreign high-end brands, Mercedes-Benz's localized production is the latest, but with the C-Class starting production in China, Mercedes-Benz also began to gradually increase the local procurement rate of parts.
According to FOURIN, more than half of Mercedes-Benz’s parts purchased in China come from its original international supplier’s production base in China.
In this context, China's auto parts companies recently appeared "a trend of foreign monopoly operations." Yan Guangming, a veteran in the automotive industry, told reporters on July 20: "The recent discovery of some foreign auto parts companies has reached 60% and 70%, and some of China's major shareholders have even become minority shareholders."
Some of the major parts and components companies supporting high-end cars are owned by foreign parties. For example, Tianjin Toyota Synthetic Co., Ltd., which is supported by Tianjin Toyota, has a ratio of 85.9% for Toyota Synthetic and 9.1% for Tianjin Brakes Factory; Benecke-Changshun Automotive Interior Materials Co., Ltd., which is a subsidiary of BMW Brilliance and Beijing Benz, has It is a company of the Continental Group.
"The WTO's judgment is not aimed at a certain country. In fact, our industrial policy has certain loopholes." Yan Guangming believes, "More worthy of our consideration is that, as the market becomes more international and more competitive, it does not pass a policy. One approach will be able to play a protective role. It has been 30 years since the development of the automotive industry through Sino-foreign joint ventures. We should consider what lessons need to be summarized."
Yan Guangming further analyzed the reporters. At present, foreign-funded automobile manufacturers increase their supporting systems in China, and they are expressing a voice: "Leaving China, foreign capital can also survive in the Chinese market." In addition, many joint-venture auto companies are now busy introducing the full range of foreign products into China. Shanghai GM, Shanghai Volkswagen and other joint ventures are all operating imported car sales.
"Foreign auto manufacturers entering China through joint ventures have played a catalytic role in the overall development of the Chinese auto industry. But for a long time, just like smoking opium, the Chinese joint venture will have reliance," said Yan Guangming. To some extent, the historic mission of the joint-venture car company has been completed. This really makes the automotive industry think deeply."
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