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[YesAuto Deep Comment] Recently, the Ministry of Finance announced that it will lower the tariffs on auto imports from July 1, 2018. This move marks the further acceleration of the opening up of China's auto industry. But why did the tariff as a trade barrier suddenly drop? Can consumers get real benefits from it? What impact will domestic automakers, including joint ventures and Chinese automakers, suffer? Where do parts companies go? What influences and fluctuations will the pattern of the automobile industry, which are related to national strength and people's livelihood, be in different periods? Please see this in-depth analysis.


●What is “Deep Commentary Questions”?

Deep Commentary Questions ” is the first column created by Autohome for industry-end users. It is written by senior practitioners in the auto industry to exclusively analyze/demystify major industry events. In addition to lively appearances, we want to present you with exploration and thinking about the nature, cause and effect, and future possibilities of things.


The industry commentators in this issue -the intelligent electric automobile expert group, consists of a group of automobile professionals with master's and doctoral degrees, and more than ten years of work experience in the automobile industry. They are distributed in universities, automobile industry associations, parts companies, OEMs, consulting companies, etc. The formation of senior people in the industrial chain. As the auto industry is transforming and upgrading to intelligent and electrified, we will share the new technology of the auto industry with more people.

The author of this article: Hu Yufeng, has successively engaged in automobile electronic control development, vehicle testing, energy saving and new energy automobile industry consulting, etc., has participated in the national 863 major project, the Ministry of Industry and Information Technology “Energy Saving and New Energy Vehicle Technology Roadmap”, and the Chinese Academy of Engineering More than 10 major research/actions such as “Strategy”. He is good at review analysis and policy analysis of the automobile industry.


Highlights of this issue

★ Tariff policies in different periods have played a prominent role in “escorting” China’s auto industry. ★ This tariff reduction is stimulated by both objective factors from the Sino-US trade war and subjective factors in macro-control. ★ In the short term, tariff reductions will not benefit all consumers ★ In the long run, there are many benefits. Due to the decay of the vehicle industry’s layer-by-layer transmission, the joint venture brand passively constitutes the first line of defense and is the first to be impacted. ★ In the long run, Chinese brands are not one-sidedly under pressure. Outweigh the disadvantages ★ It is good for dealers, but the parts industry will accelerate the pace of reshuffle

1. Looking back on tariff adjustments, the role of industry escort is highlighted

On May 22, the Ministry of Finance announced that starting from July 1, 2018, the import tax rate for complete vehicles will be reduced from 25% to 15%, and the import tax rate for auto parts will be reduced to 6%. This is the first time since 1985 in my country. Reduced the import tariff rate of automobiles ten times.

time matter
Before 1986

The import tariff rate of the whole vehicle is 120%-150% ,

80% import adjustment tax will be levied later

1986

The two taxes are combined, and the tariff rate is 220% for displacement of 3.0 liters or more .

Tax rate of 180% for displacement below 3.0 liters

1994 A drop of 3.0 liters is 110%, and a drop of 3.0 liters and above is 150%
1997 A drop of 3.0 liters is 80%, and a drop of 3.0 liters or more is 100%
2001 A drop of 70% for 3.0 liters and 80% for 3.0 liters and above
year 2002 3.0 liters and down to 43.8%, 3.0 liters and above, down to 50.7%
Year 2003 A drop of 3.0 liters is 38.2%, and a drop of 3.0 liters and above is 43%
year 2004 A drop of 34.2% for 3.0 liters and 37.6% for 3.0 liters and above
2005 Implement automatic import licensing management, while reducing tariffs to 30%
year 2006

Reduce the tariff rate of imported cars from 30% to 28%;

Re-adjusted to 25% during the year and is still in use today

Tabulation: Industry Commentator of Auto House

Looking back at the previous tariff adjustments, it can be found that the decision-making level has adopted a “gradual and orderly” management approach, which has an excellent protective effect for the early development of China's automobile industry, especially the passenger car industry, and avoids being caught in the “baby-raising” stage. Imported cars, the “Lianjiazi” KO, have today's market share of Chinese brand passenger cars that is close to half of the country.

To achieve such a positive protective effect, it must be linked to the policy of “the upper limit of the equity ratio of joint venture car companies does not exceed 50%”. The former is “forcing foreign capital to be domestically produced, otherwise the price is too high”, and the latter is “the profit cannot be taken away, leaving half to nurture Chinese brands.”

Consumers may say: What does this have to do with me? In fact, it matters a lot! As a major pillar industry with an annual output value of more than 8 trillion yuan and accounting for one-tenth of GDP, the automobile industry has not only played a huge role in pulling the industry chain and provided nearly 100 million jobs, but the development of Chinese brands has also allowed most ordinary people. Consumers have obtained a more affordable car purchase price, otherwise you are likely to spend more than 200,000 yuan today to buy a Santana 2000.

Model Domestic car sales prices in the 1990s
Santana 2000 195,000 yuan
Honda Civic 285,000 yuan
Toyota Camry 395,000 yuan
Hyundai Sonata 320,000 yuan
Subaru Legacy 265,000 yuan
Mazda 626 355,000 yuan
Honda Accord 398,000 yuan
Audi 100 335,000 yuan
Chevrolet Corsica 265,000 yuan
Tabulation: Industry Commentator of Auto House

2. Downgrading the background: the dual influence of subjective and objective factors

Since 2006, 25% of vehicle import tariffs have been maintained for a full 12 years. Why did it suddenly change this year, and the rate of decrease has plummeted by 10% from the previous few times of 5.4%, 7.6%, 2%, and 3% There are so many reasons that deserve to be investigated.

The premise of tariff reduction is that China's auto industry has already laid a solid foundation. Regardless of whether it is from the 43.88% market share of Chinese brands or from the perspective of the completeness of the entire industry chain, after more than 30 years of development, my country’s automobile industry has initially established the foundation to resist the impact of foreign investment, and is no longer a poor one. situation. This is the prerequisite for the decision-making level to make adjustments.

Tariff reduction is more based on the endogenous power of industrial restructuring, optimization and upgrading. After the “infant” period, the long-term greenhouse will certainly not be able to nurture strong young people, but will nourish deformed “giant babies.” Based on the development experience of the world’s major auto industry countries, the gradual introduction of external stimulus factors to force Chinese brands to adjust their industrial structure, eliminate outdated production capacity, and promote the further development and growth of high-quality resources is an important and effective way for the automotive industry to implement supply-side reforms. method. 

country policy
Japan

In 1970, tariffs on small cars with a wheelbase ≤ 2700mm were reduced to 20%

● Since 1971, tariffs on cars have been reduced to 10%

It dropped to 8% in 1972

Completely abolished auto tariffs in 1978

Korea

●From 1926 to 1986, the import of automobiles was first not allowed, and then heavy tariffs were changed to block the import of automobiles

●From 1986 to 1995, tariffs were gradually reduced to 60%, 50%, 25%, 10%, and 8%

●Currently, some free trade agreement countries implement zero-tariff policies

Tabulation: Industry Commentator of Auto House

This tariff cut was also stimulated by external factors from the Sino-US trade war and was implemented ahead of schedule. From 2015 to 2017, the industry management department has conducted expert consultation and internal opinion solicitation on the issue of equity deregulation and tariff rates, and the majority of opinions are 5-10 years later. The early implementation of this time was also affected by the macro environment of the Sino-US trade war, and it was implemented early as an exchange of interests between the two parties.

Third, the consumer side: short-term small-scale benefits and long-term benefits

The first thing to mention is the method of calculating the price of imported cars in China. According to the current policy, a car needs to be levied three main types of taxes, including customs duty, consumption tax and value-added tax, from customs declaration to sale.

Tax Calculation
tariff Customs price × 25% (15% after July 1)
sale tax

Customs declaration price + tariff) ÷ (1-consumption tax rate) × consumption tax rate

Note: The tax rate is divided into 1-40% according to the displacement

VAT

(Customs price + tariff + consumption tax) × 17% (adjusted to 16% after May 1)

Because the tariff is calculated first, the total tax price is theoretically reduced by more than 10%. As the first calculation item, tariff has a base superimposition effect on the calculation of the following two taxes. Therefore, although the tariff rate is reduced by 10%, the overall tax price can be reduced by about 15% in theory. The higher the displacement, the greater the reduction (due to the product There are many tax numbers, and 15% is just an estimate. The estimated value of each displacement model is already common on the Internet, and I will not repeat it here.) This does not include the purchase tax reduction when buying a car.

Due to the small volume of imported cars and the narrow consumption level, the early benefit is not large. From 2011 to 2017, my country's auto imports have always been at the scale of just over 1 million for this reason, which is a very small proportion compared to the sales volume of more than 28 million vehicles in 2017. In addition, based on the data in the past year, the average price of domestic imported cars CIF (Cost Insurance and Freight: CIF) has stabilized at around 40,000 US dollars, and the landing price easily reached 600,000 yuan, which is far from ordinary consumer purchases. The main force range. For such a small group of people, a 10% reduction in tariffs and tens of thousands of dollars less is just “more shrimps in paella.”

It is not impossible for dealers to reap profits as car companies adjust prices or wishful thinking. After the policy was released, Tesla was the first to respond. Since then, Volvo, BMW, and Mercedes-Benz have successively issued official announcements, announcing the reduction of imported car prices to varying degrees. However, since the guide price is not the final selling price, dealers may intercept profit margins after the “tariff reduction”, such as maintaining the original price on models that are in short supply such as Toyota Alfa. In this regard, consumers may not be able to get complete benefits, but some imported models with sluggish sales and manufacturers with strong controls (such as Tesla's unified price system) can indeed enjoy preferential treatment. This should be distinguished.

Car company Adjustment plan (simplified)
Tesla

The guidance prices of Model S and Model X have been lowered,

A drop of 4.8-9 million yuan

Jeep Grand Cherokee's official drop rate is up to 65,000 yuan
Volvo

Many models including XC90, V90, and V60 all have a decline .

Among them, the highest drop of XC90 reached 102,000

BMW From 1 series to M series, the entire line will be reduced by 1.5-162,000 yuan
Benz

From smart to AMG, the reduction ranges from 0.72-25.6 million yuan , respectively.

The main model is reduced by 1.7-100,000 yuan

Audi The three major car lines of A, Q and R will be reduced by 4.88-165,000 yuan
Tabulation: Industry Commentator of Auto House

In the long run, tariff cuts will slowly push the overall price system downward to benefit all people. Although the current guidance prices of BMW, Audi and other car companies have been lowered by tens of thousands of yuan, and in the market of 400,000 to 500,000 yuan, it is only 12,000 yuan. It seems that the strength is not large and the audience is small, but with the import and parallel With the gradual transmission of imports, domestic luxury, ordinary joint ventures, and Chinese brands, the overall price system will gradually decline. At the same time, referring to the reduction of foreign automobile tariffs, China's automobile import tariffs will still be further reduced in the future, which will benefit all consumer groups and purchase imported/domestic cars at more favorable prices.

Consumption tax is the bulk, and the real concessions will be reflected in imported new energy vehicles in the future. As foreign auto companies continue to strengthen the development of new energy vehicles, more new energy vehicles will enter the country through imports in the future, and new energy vehicles, especially pure electric vehicles, have a small displacement, and the consumption tax will be greatly reduced. Intuitively speaking, a car with a tariff of 100,000 yuan may have a consumption tax of as much as 330,000 yuan. The relationship between the two can be seen.

Fourth, the vehicle end: the joint venture is the first to encounter it, and the short-term impact of Chinese car companies outweighs the long-term benefits

There is no doubt that tariff cuts will stimulate the growth of the import market, but this growth will not be very radical. Due to relatively fixed demand and limited consumption levels, changes on the supply side will push the demand side to expand in a mild manner, with an expected increase of about 10%, which is also the ingenious design of the 10% reduction.

From a national perspective, the German automakers, not the American ones, are the most beneficial in the short-term. In terms of specific sales data, in recent years, most of the German-based car companies have accounted for the highest proportion of imported cars. Only Ford is the only car company in the US, while Cadillac has even been squeezed out of the top 15. It can be seen that it was originally a condition of the Sino-US trade war, but as a result, trees were planted in the east and sprouts in the west. Whether this result was intentional or there are other reasons, I won’t go into details here. Anyway, the United States has not made much benefit from it and will not let it go.

More interesting is to focus on the gradual conduction effect. The so-called step-by-step transmission, we can simply understand: the market above 500,000 yuan is basically imported; 300,000-500,000 yuan basically belongs to domestic luxury cars; 150,000-300,000 yuan basically belongs to ordinary joint venture cars; Gradually occupied by Chinese brands.

We can see some clues about how to conduct step-by-step transmission from imported products: more than 100,000 yuan will be reduced by several thousand yuan, more than 200,000 yuan will be reduced by more than 10,000 yuan, more than 300,000 yuan will be reduced by more than 20,000 yuan, and 500,000 yuan will also be reduced. Only 30,000 to 50,000 yuan. The gradual conduction in the future will also be conducted with reference to this situation.

Model Original price (ten thousand yuan) New price (ten thousand yuan) Decrease (ten thousand yuan)
smart1.0L 52kw hardtop smart version 12.40 11.68 0.72
MINI ONE three-door version 20.50 18.88 1.62
Volvo V40

22.99

21.59 1.4
Mercedes A 180 23.38 21.98 1.4
Mercedes-Benz CLA 200 dynamic 27.28 25.68 1.6
Volvo V60 30.99 28.99 2
Mercedes C200 38.08 35.88 2.2
Volvo V60 Cross Country 39.99 37.19 2.8
Mercedes-Benz C200 4MATIC Coupe 41.98 39.68 2.3
Volvo V90 Cross Country 47.98 44.68 3.3
Mercedes-Benz C200 4MATIC wagon 48.58 45.28 3.3
BMW 330i xDrive M sports 51.68 46.98 4.7
BMW M240i Performance 53.38 46.98 3.4
Jeep Grand Cherokee 62.99 57.99 5
Tabulation: Industry Commentator of Auto House

In terms of this result, the luxury domestic car (300,000-500,000 yuan) of the joint venture car company was the first to be the target of the impact due to its proximity. Take the Mercedes-Benz GLC/GLC coupe SUV as an example. The current price of imported cars has dropped to 463,800 yuan. The gap of 100,000 yuan has been reduced to less than 50,000, which may affect consumers abandoning domestic production and choosing imports. What can slow down the “brother fight” is product differentiation. At present, almost no product on the market has the same imported version as the domestic version, but it is not optimistic as the price gap narrows.

Model Original price (ten thousand yuan) New price (ten thousand yuan)
Mercedes-Benz GLC200 4MATIC Coupe SUV (imported) 49.38 46.38
Mercedes-Benz GLC200 4MATIC (domestic) 39.48 39.48
Tabulation: Industry Commentator of Auto House

Therefore, the price drop of luxury brands of joint ventures of 20,000 yuan to 20,000 yuan is already a certainty, which will further put pressure on the joint venture market of 150,000 yuan to 300,000 yuan. This market will also comply with the price reduction of 10,000 yuan to 10,000 yuan, and finally fall on the Chinese models. A price cut of RMB 0.5-10,000 is also inevitable.

Due to the sequence of transmission, it is expected that the adjustment of the entire price system will be completed in half a year to a year, which gives Chinese brands time and space to adjust themselves.

Therefore, the process of localization of foreign capital will be delayed, and efforts will be increased to develop competitive new models to cope with market changes. In this regard, Toyota China’s Chairman Kobayashi Kazuhiro’s point of view is quite correct: “The reduction of automobile import tariffs is a double-edged sword. In the short term, for Toyota’s imported car business, consumers can obtain lower prices. Products can sell more cars. However, if Toyota does not focus on being able to produce more competitive models and make more competitive plans for the needs of future consumers, the manufacturers will ultimately fail. itself.”

For Chinese brands, thinning profits and forced high-end development are unfavorable factors. In the short term, the profit margin of domestically-made cars is not large (ranging from several thousand yuan to more than 10,000 yuan). The price drop of several thousand yuan after the gradual transmission will put greater pressure on major Chinese car companies. , Many small and medium-sized car companies may even be eliminated, and the market will gradually enter the reshuffle mode. At the same time, the absolute high-end (Nio, etc.) and the gradual high-end (Lynk&Co, etc.) will be strongly restrained from the upper level, which will be an extremely headache for the upward development of car companies in the next few years.

In the long run, offsetting the advantages and disadvantages of tariffs and positive stimulus will promote the differentiation of Chinese brands to form international giants. First of all, although the tariff on the whole vehicle was reduced by 40%, the tariff on parts and components was also reduced by 40%. In 2017, the total size of imported auto parts was 37.05 billion US dollars. Based on the customs value, the average use of imported parts and components per vehicle is about 10,000. RMB, while Chinese brands usually use 5000-8000 yuan, which can also reduce the cost of 2000-3200 yuan, thereby offsetting the pressure of falling prices of some complete vehicles. In addition, the reduction in tariffs will enable Chinese car companies to gradually face international competition and strengthen endogenous motivation to increase product R&D and quality construction. In the long-term perspective of 20 years, such appropriate stimulus is not a bad thing. On the contrary, it can help a small number of Chinese companies. The leader gave birth to the formation of an international giant. In fact, there is no need for so many car companies in China to be a mixed bag. A Chinese version of Toyota or a Chinese version of Volkswagen is enough.

Fifth, the parts side: short-term peace and quiet, but the shuffle horn has been sounded

Domestically-made parts and imported parts are currently complementary, and short-term direct conflicts are relatively small. Although the amount of imported parts and components has reached 37 billion U.S. dollars, the volume of domestic parts and components market is still small compared with the trillions of domestic parts. In addition, domestically-made parts and imported parts are still complementary and not competitive. Therefore, the price reduction of imported parts in the short term will not have a direct impact.

The rise in the stock market cannot be simply understood as an overall positive. The industry reshuffle has begun. It is very interesting that after the news of tariff cuts appeared, some auto parts industry stocks have risen. Icordi, Dongan Power, Jin Qilin, etc. have risen by more than 6%. For this phenomenon, we cannot simply interpret it as positive news, but should take into account two factors: first, these companies are among the most powerful in the subdivisions; second, it is rumored that the tariffs on parts and components will be completely cancelled. But from another point of view, the implementation of zero tariffs on auto parts must be before the complete vehicle. Therefore, the good days for Chinese parts companies are not a few days away. To put it bluntly, the industry reshuffle has already begun. It's not yet at the stage where the main character sings.

Sixth, the sales end: dealers benefit, parallel imports will increase the proportion

As we have analyzed before, because of the profit retention and the overall expansion of the scale, the import distributors can obviously benefit a lot, so I won't repeat them here. What should not be mentioned is parallel imports. Statistics show that in 2017, a total of 172,000 parallel imports of automobiles in China, an increase of 29.8% year-on-year, accounted for only 14.2%. The biggest difference between parallel imports is that it is not under the control of vehicle companies! In other words, in order to achieve reasonable price stratification, OEMs will control the price reduction space, but parallel imports are simple and rude, directly bypassing OEMs to almost completely enjoy the benefits of tariff reductions, so they will win the favor of consumers more. , And the proportion will also increase.

But what we want to remind in particular is that parallel imported products are generally inferior to Chinese-regulated imports in terms of Chinese matching, purchase channels, and after-sales maintenance. Therefore, consumers who purchase parallel imports should pay special attention. Especially in the purchase channel, try to choose the “home” with the same company name in the car, procedures, invoices, and contracts, otherwise disputes will easily arise.

Seven, conclusion

Having said that, the core meaning of the tariff reduction is one thing: consumers will have more and more opportunities to buy cheaper and better cars, and domestic car companies, including parts and components companies, really have to work hard, wolf really On the way here.