China hits back at US car imports

The South China Morning Post, December 16, 2011


Beijing slaps punitive duties in move seen as retaliation for sanctions on Chinese tyre exports

by Neil Gough

Beijing's decision to impose anti-dumping duties on cars imported from America appears to be politically rather than economically motivated, but that will have minimal impact on the US car industry, say analysts and industry executives.

Starting yesterday, the Ministry of Commerce began slapping punitive duties of between 2 per cent to 21.5 per cent on exports of United States-made big-engine cars and SUVs to China.

That is in addition to the 25 per cent tariff it currently assesses on imported cars, the maximum allowed under the terms of its World Trade Organisation entry agreement.

The move appears to be Beijing's retaliation after China lost its final appeal to the WTO in September against a 2009 US move to impose anti-dumping duties on tyres imported from China.

Nevertheless, analysts said the real impact of China's punitive duties on US carmakers would be minor.

"This appears to be a retaliatory measure taken by China which only strikes at the margins, since the import car market has a rather small share of the auto market," said Bill Russo, a senior advisor at Booz & Company and the former head of Chrysler's business in China.

"Normally, such actions are taken in order to help local manufacturers. However, this makes little sense in this case, as no local manufacturer directly competes in the price segments where imported cars are positioned."

General Motors, Ford and Chrysler collectively sold 1.37 million cars in China in the first 10 months of this year, of which more than 95 per cent were made in China, according to data from JD Power and Associates. About 58,000 of those cars were imported, and not all from US plants.

"This looks like a case of killing the chicken to frighten the monkey," said Michael Dunne, president of industry consultancy Dunne & Company and author of American Wheels, Chinese Roads: The Story of General Motors in China.

"China wants to send a signal to Washington: `See how quickly we can move on your car imports? What if we decided to target Boeing instead?' Now, that would really sting."

Chrysler cars account for many of the low export volumes of US-made cars to China, as Chrysler does not have a production presence there.

The US car exports affected include Honda America's small-scale imports, a few models under General Motors' Buick and Cadillac brands, and high-end, US-made Mercedes-Benz and BMW SUVs.

"GM generally builds where we sell," Shanghai-based spokeswoman Dayna Hart said yesterday.

"In fact, GM's import volume out of the US is less than half of 1 per cent of its domestic production in China and is limited to selected Buick and Cadillac models."

Ford spokesman Trevor Hale said: "We don't export any vehicles from the US to China. Our entire China vehicle portfolio - except for the Edge [SUV], which is imported from Canada - is built locally."

US car exports to China tend to be high-priced, low-volume models whose buyers are wealthy.

"Luxury car buyers are typically more affluent and are not going to fret over this extra cost," Samsung Securities car analyst Steve Man said.

"We see little or no impact to demand for luxury cars as a result of these new duties."

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