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As China cuts tariffs, big winners won't be American brands
Yang Jian | 2018/4/13

SHANGHAI -- Facing U.S. President Donald Trump¡¯s threats to impose tariffs on more Chinese goods, President Xi Jinping pledged this week to slash China¡¯s tariffs on imported vehicles. 

But automakers that will benefit most from China¡¯s move are German and Japanese players, not American brands that Trump is eager to protect. 

To de-escalate tensions over bilateral trade between China and the U.S., Xi, while addressing an international forum Tuesday in the south China island province of Hainan, pledged to better protect intellectual property rights and further open China to foreign investors. 

When it comes to the domestic auto market, Xi said China will reduce the tariff on imported vehicles ¡°by a big margin¡± this year.

Trump, who previously lashed out at China¡¯s 25 percent import tariff on American vehicles, was obviously pleased and tweeted this week that the two countries are ¡°making good progress¡± in resolving the trade disputes. 

But if he bothered to take a close look at the effect of China¡¯s move to cut taxes on imported vehicles, Trump would see the main beneficiaries are not American brands, but German and Japanese brands he lambasted for ¡°pouring freely¡± into the U.S. for years. 

To be sure, Tesla Inc. is poised to benefit from the cut in tariffs Xi has promised. In 2017, the U.S. electric vehicle maker imported 14,779 vehicles into China, where it has yet to produce locally, according to LMC Automotive, a market consultancy.

Ford Motor Co. and Fiat Chrysler Automobiles¡¯ Jeep brand also stand to gain. Last year, Ford sold 72,942 imported vehicles in China, of which about two-thirds were Lincoln models. FCA delivered 16,545 imported Jeep models. 

General Motors, the largest U.S. automaker in China, now builds virtually every model sold in China in the country. LMC Automotive¡¯s data show GM¡¯s top-selling imported model is the Chevrolet Camaro. But last year, only 977 Camaros were delivered in China. 

By contrast, BMW Group, Toyota Motor Corp., Daimler and Volkswagen Group import far more vehicles into China than their American peers. 

In 2017, each of the four companies imported more vehicles into the market than American brands combined. 

During the year, BMW Group imported 223,522 vehicles under the BMW and Mini brands while Toyota brought in 219,138 cars and light trucks under the Toyota and Lexus marques, according to China Automobile Trading Co., China¡¯s largest imported vehicle dealer. 

Daimler imported 183,537 vehicles under the Mercedes-Benz brand alone. And VW Group shipped 178,898 vehicles to China under the Porsche, Audi and Volkswagen marques.

With four decades of fast economic growth, Chinese consumers¡¯ demand for imported vehicles, especially SUVs and luxury brands, has remained strong.

Despite the hefty tariff, China¡¯s imports advanced 16 percent to nearly 1.25 million in 2017, according to the China Association of Automobile Manufacturers.

Given strong domestic demand, a significant reduction in the tariff would give imported vehicle sales a powerful boost. 

But because German and Japanese brands command a lion¡¯s share of China¡¯s vehicle imports -- even more so in the near future as Lincoln is set to start local production next year -- there won¡¯t be much for American brands to gain from the cut in tariffs that Trump has secured for them.  

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