The WTO Appellate Body issued a ruling on the dispute between China and the United States, the European Union and Canada on auto parts on the 17th. China's import of auto parts and components is illegal. Prior to this, China’s two appeals on this case failed. According to WTO rules, after the failure of this appeal, the verdicts of the appeal will no longer be overturned and the domestic parts and components industry may be affected.
Relevant management practices are facing changes
The reporter learned that the dispute between China and foreign countries concerning the import of auto parts originated from the provisions of China's "Administrative Measures for the Import of Auto Parts That Constitute the Characteristics of Complete Vehicles." According to the “Measuresâ€, the sum of the prices of imported parts and components that reaches 60% or more of the total price of the entire vehicle will be considered as the import of the whole vehicle, and the same tariff as the imported vehicle will be levied.
According to public information, China imposes a 25% tariff on imported vehicles and a 10% tariff on imported spare parts for maintenance. In other words, for the imported auto parts and components that constitute the "characteristics of the vehicle," China will levy a high tariff of 25%, which is 15% higher than the general tariff.
The WTO ruling found that China violated regulations, which means that the "Measures" will face changes. Officials of the Ministry of Commerce once said that the main purpose of China’s introduction of the “Measures†is to prevent lawbreakers from using the tax difference between vehicles and parts and to evade tariffs through illegal assembly. Some foreign auto companies through the "segmentation" approach, through the import of complete sets of spare parts to assemble cars in China, to evade tariffs, harm China's interests.
The United States, the European Union, and Canada believe that China imposes the same tariffs on vehicles that equal or exceed 60% of the vehicle's total value, disguisedly forcing Chinese-foreign joint ventures or Chinese automobile manufacturers to use Chinese-produced auto parts. Component manufacturers have been forced to transfer production sites to China, causing workers in relevant industries in Europe and America to become unemployed.
“At the moment when the financial tsunami has swept the global auto industry, Europe and the United States have become even more 'overwhelmed' by this dispute, because with the decline of tariffs, their products can drive even longer into China.†An industry expert analyzes the background of China’s loss the reason.
High-end parts industry hit
The WTO requires China to abandon the 25% tariff on parts and components, which means that a large number of imported spare parts, especially the prices of high-end products, will drop sharply. This is undoubtedly a "big shot" for China's spare parts industry, which is still under development.
Li Dan, an auto analyst at Galaxy Securities, told reporters that after the tariff reduction, it is difficult to pose a threat to the traditional advantage of components, but it is not conducive to domestic suppliers to enter high-end products. He analyzed that the domestic parts and components products have different core competitiveness with the US, Europe and Canada products. The advantages of China's spare parts enterprises are mainly concentrated on labor-intensive and capital-intensive products. In such products, similar products in Europe and the United States are still difficult to form a threat.
However, the advantage of multinational auto parts companies lies in mastering the core technologies of key components. Tariff reduction will directly enhance the market competitiveness of this part of the product, and this kind of product is the “soft rib†of the domestic parts and components industry. "That is to say, it will slow down the process of localization of some high-tech products that are in the research and development stage or the beginning stage."
Domestically produced parts are likely to be "missed" for high-end product development and production. High-end products mainly refer to automotive safety, controlled electronic products, engine systems and other products.
Zhou Yingjun, who has long paid attention to the auto parts industry, expressed the same view. He believes that the industry reshuffle will accelerate and the parts industry structure will become clearer. The joint venture will be closer to its suppliers of parts and components, and it will be even more difficult for its own branded parts and components companies to enter high-end components such as engine EFI systems and ESP.
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