By Joyce Yu
Philadelphia, PA–In an effort to open up the world’s largest auto market, China announced to lower the tariffs on imported cars. Automakers on Wall Street rallied on Tuesday morning with GE and Ford both gaining about 1%.
The Chinese Finance Ministry said Tuesday that it will cut import duties on passenger vehicles to from 25% to 15%, starting July 1. The announcement came at a time when China and the United States just agreed to a ceasefire in their recent trade spat and also fulfilled an earlier pledge by Chinese President Xi Jinping at Boao Forum for Asia.
High-end brands including Porsche, BMW and Mercedes-Benz reacted swiftly with welcoming messages. German luxury carmakers, which include Volkswagen AG’s, Porsche and Audi set to be the biggest beneficiaries, according to a market insider quoted by Reuters anonymously. “That’s just because of the volume of imported cars they sell.” Some analysts remain unmoved by the announcement. “The lower tariff might move that a few percentage points south, but that’s all,” said Michael Dunne, president of China-based auto consultancy Dunne Automotive. “This is no breakthrough event.”
Nevertheless, American carmakers are also exporting more vehicles to China. It sent $10.5 billion of cars, new and used, to China last year, up from $8.8 billion in 2016, according to the US Census Bureau.
Apart from tariff cutting, China has also promised to remove restrictions on foreign investment to manufacture vehicles in the country. Previously, companies such as GM and Volkswagen had to establish joint ventures with local partners in which the Chinese companies have the majority stake. But last month, China said it will phase out those rules by 2022, starting with manufacturers of electric vehicles this year.
This is indeed good news to American electronic carmaker which has been continuing its push into the Chinese market. There were reports that Tesla is starting its recruitment efforts for an upcoming facility in Shanghai and has issued invitations for a summer internship program. In Tesla’s Q3 earning earnings call last November, company CEO Musk announced that the planned China factory will manufacture “probably Model 3 and Model Y primarily for the local Chinese market.”
Tesla currently has 30 stores in China, of which six are located in in Beijing, according to its website.
