ABSTRACT：As the doors creak wider open, every automaker has its sights set on China. The world’s largest car market is ostensibly the future of industryprofits. That promise is now under threat, though. Beijing said this week it will reduce the lo...
As the doors creak wider open, every automaker has its sights set on China. The world’s largest car market is ostensibly the future of industry profits. That promise is now under threat, though.
Beijing said this week it will reduce the long-held 25 percent tariff on imported cars to 15 percent and slash levies on auto parts to 6 percent from as high as 25 percent. Benevolent as that may look amid the current protectionist trade rhetoric, it won’t move the needle much beyond allowing the likes of BMW AG and Toyota Motor Corp. to sell a few more high-end models. Imports account for only around 5 percent of Chinese vehicle sales.
China is the one market to have yielded fast results for global carmakers, as U.S. demand heads into a rocky patch. Nissan Motor Co., for instance, predicts the country will become its biggest sales contributor this fiscal year. Volkswagen AG, the world’s largest carmaker, sold more than 3 million vehicles, or a third of its global total, in China last year.
The trouble is the market is crowded and the throngs are still pouring in. Lower duties will affect the single most important factor for automaker profits: pricing, which is already under pressure. Following the reduction, Toyota said it would cut retail prices on imported Lexuses and other vehicles. Competitors are reviewing their strategies. Lower tariffs alone will translate to a drop of about 8 percent in manufacturers’ suggested retail prices, Goldman Sachs Group Inc. estimates.