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BMW, Toyota get reprieve in crosshairs of US-China trade spat
[BEIJING] Global carmakers from BMW AG to Toyota Motor Corp got some good news from China after President Xi Jinping reiterated a pledge to reduce import tariffs on vehicles this year, heeding decades-long pleas from companies seeking better access to the world's biggest auto market.
China will "significantly lower car import tariffs" and "sincerely hopes to boost imports," Mr Xi said in a speech at the Boao Forum in Hainan Tuesday. Mr Xi also reiterated plans to loosen foreign ownership limits for car ventures and said the government will try to roll out the policies as early as possible. He didn't offer details.
Shares of local carmakers BAIC Motor Corp, BYD Co and Guangzhou Automobile Group Co all slumped after the speech as lowering the current 25 per cent import tariff would allow foreign carmakers to bring in more vehicles without being disadvantaged.
Mr Xi's moves to open up the car market comes amid a tit-for-tat trade war with the world's largest economy, in which China last week proposed an additional 25 per cent import tax on vehicles made in the US.
High-end autos, in particular, will feel the effects of a tariff cut, as less of their production has moved locally. Toyota's Lexus, in particular, stands to benefit as the only premium marque that doesn't manufacture in China or hasn't announced plans to do so.
"This is a boon for the Chinese luxury auto market," Steve Man, a Bloomberg Intelligence analyst in Hong Kong said.
Luxury sales leader Audi, part of Volkswagen AG, has been making cars in the country since 1996. General Motors Co's Cadillac, which has relegated Lexus to fifth in the luxury-car rankings, opened a factory in Shanghai in 2016.
China imported 1.22 million vehicles last year, or about 4.2 per cent of the country's total sales of about 28.9 million automobiles.
Mr Xi was reiterating a pledge by Chinese leaders to open up the nation's auto sector. At the annual gathering of China's National People's Congress last month, Premier Li Keqiang said the nation will cut tariffs on imported cars this year. Besides the tariffs, China also limits foreign carmakers' stakes in joint ventures at 50 per cent.
"The early signs from what I can see from the headlines are very encouraging," said Peter Fleet, the Asia chief of Ford Motor Co.
Shares of BAIC, a local partner of Daimler and Hyundai Motor Co, led the declines among carmakers falling as much as 9.6 per cent in Hong Kong trading.