Yesterday, the Chinese Ministry of Commerce announced that a new tax is imposed on U.S.-made vehicles with a motor capacity of 2.5-liters and above, effective today, December 15.
The so-called “anti-dumping” duties imposed not just on U.S. carmakers, but all companies that manufacture cars in the United States, were imposed because the Chinese authorities felt that U.S. imports were “damaging the local car industry”.
Most analysts, on the other hand, agree that this is China’s response to the World Trade Organization rejecting its appeal on U.S. duties on imported tires three months earlier.
“The move shows that China is always capable of intervening politically in its markets”, Bankhaus Metzler’s analyst Juergen Pieper told Bloomberg News. “The automobile industry is very dependent on China for growth, and there’s doubts about the pace of future expansion.”
Despite GM’s share falling to its lowest point since November 2010 after the announcement, JPMorgan analyst Himanshu Patel estimates that the newly imposed duties won’t hurt the carmaker that much.
That’s because most of the 2 million models it sold this year in China are made locally, and only a few, like the Cadillac SRX SUV, are imported from the U.S. However, Patel notes that “it may accelerate GM’s localization plans”.
Ford is not affected by the new tariffs, since it imports just one model to China, the Canadian-built Edge SUV. On the other end of the spectrum, Citigroup says that companies which have “material exposure” are BMW, which imports about 25,000 U.S.-built vehicles annually, Chrysler, with 24,000 imports, most of them Jeeps, and Daimler, with 18,000 units with an engine capacity of 2.5-liters and above imported each year.
While both Democrat and Republican Senators have lashed out against the new taxes, analysts don’t expect them to actually have that much of an impact.
As senior analyst at IHS Automotive Namrita Chow says, “this is hardly going to flummox the buyer of a high-end car. They’re really not going to be bothered by a few percent here and there.”
BMW representative Mathias Schmidt said that while the Chinese government’s decision was “regrettable”, he doesn’t expect to have a significant impact on the brand’s sales.
Story References: Bloomberg News