China’s Truce with Trump is Good News for Car Companies

In a major change to a very long standing policy, the People’s Republic of China (PRC) has announced that it will be cutting the import duty on imported cars to 15%, a move that will further open up the market to imported cars, something that was high up on President Trump’s agenda.

Up to now, the PRC levied 25% duty on all car imports, which in effect protected local car manufacturers and allowed them time to ‘learn’ the business before they were swamped by the more experienced and competitive manufacturers from overseas, which very much included the US of Americaland.

Of course President Trump claimed that amongst other things, such as rampant intellectual property theft, this was an unfair trade practice and threatened a trade war with China. Whilst China threatened to bite back, the balance of trade is so very much in favour of the PRC and thus the USA had so very much more to lose should they be denied access to its biggest market. Therefore, it has barked loudly yet caved in all the same, and you have to chalk this up as a win for the Trump administration.

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Presently, it is mostly luxury cars that are imported in to the PRC annually, in a trade worth US$51 billion last year; of these, about US$13 billion came from the US of A, which includes vehicles made there by non-US manufacturers. Shares in TATA, the Indian multinational manufacturer that also owns Jaguar Land Rover, jumped on the news, and as the sixth largest importer into the PRC, it is expecting to enjoy a surge in sales, particularly for its Evoque and new Velar models. However, BMW, who is the largest luxury importer and the tenth as well, if you include the Mini brand that it owns, will surely be the biggest winner.

Perhaps more significantly, though, is the reduction in tariffs on car parts, which will fall to just 6% and the rule change that will allow foreign companies to own more than 50% of local ventures. There sure is going to be some fallout in the market in the People’s Republic and some would say it is about time the playing field was levelled a little.

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