Automotive Industrial Policy Updates
2012/04/05 | By Michelle HsuArgentina Regulates Imports
To stem outflow of foreign currency and reduce trade deficit, the Argentinean government recently adopted import license management regulations to control imports, becoming the world's second protectionist country besides Russia.
The Argentinean government announced a list of imports to be controlled as high-priced automobiles, auto parts, motorcycles, moulds etc., whose importers must
apply for Non-Automatic Import License (or LNAPI which is the acronym for the Spanish equivalent “Licencia No Automatica Previa de Importacion”).
The regulations stipulate that firms looking to import the above-mentioned items must guarantee equivalent export of the same item, without being comprehensive in coverage to exclude for examples repair tools and diesel car parts.
Having announced the strict import regulations last year to control trade deficit in the automotive industry, the Argentinean government in 2010 recorded a trade surplus of US$1.396 billion in automobile trade, but a trade deficit of US$6.39 billion in the auto parts sector, resulting in a deficit of US$4.913 billion for the automotive industry.
Argentina's rising demand for auto parts is partly spurred by tax-saving motivation, with people opting to buy second-hand cars older than 12 years to avoid paying tax, but generating demand for certain parts, services that are typically needed on older cars.
Argentina has 14 carmakers, including Renault, Ford, Volkswagen, Fiat, General Motors, Peugeot, Citroën, Toyota, with the others being IVECO, Chrysler, Scania and Agrale which make trucks and passenger vehicles, all of which turn out annually 88,000 vehicles.
Brazil Ups Import Car Taxes
The Brazilian government's announcement of raising taxes on automobile imports last year caused a backlash from Chinese carmakers who had been eyeing the largest South American nation as a major market, which has massive potential with irresistible business opportunities.
In a protectionist move, the Brazilian government announced last September that it will raise taxes on imported cars by 30% to protect locally-made cars. Certainly with great potential, Brazil surpassed Germany to become the fourth biggest automobile market in 2010, only after China, the U.S., and Japan, having posted in 2011 sales of 3.63 million vehicles, a 3.4% growth from the previous year.
According to Brazil's National Association of Motor Vehicle Manufacturers, imported cars accounted for 23.6% of total car sales in Brazil last year, with Chinese carmakers as Chery Automobile, JAC Motors, and Lifan Motors all ranking highly.
Brazil's market potential and preferential investment environment as well as favorable conditions offered by local governments make the nation a magnet for overseas investments by Chinese carmakers, of which Hafei, Jinbei, Geely, BYD, Sinotruk, Great Wall, Haima and Changan all expressed willingness to work with Brazilian enterprises to build factories for local production.
Meanwhile, JAC Motors is partnering with Brazil's SHC group to build a plant in the Camacari industrial zone in the northeastern Bahia state, with an initial investment of 900 million Brazilian real (about US$500 million), with initial annual production to be about 100,000 cars to create 3,500 full-time jobs.
Besides the hiking import tax, the Brazilian government reportedly discreetly pressured Beijing to narrow the trade gap between the two countries, which may have influenced Chinese carmakers' decision to invest in Brazil. Last year, Brazil's president Dilma Rousseff visited China, asking Chinese firms to not only export products to Brazil, but also engage in R&D and mass production locally.
Japan May Lower Automobile Tax
Last November, the presidents of Japan's big carmakers met and produced a petition with over 4 million people's signatures, appealing to the government to reduce automobile-related taxes to aid its automobile industry, which has been battered by the excessively strong yen, last year's earthquake, and slowing sales, a sentiment confirmed by Akio Toyoda, president of the largest Japanese carmaker.
The industry heads pleaded that, without governmental help, their business development will be sapped to cause major layoffs due to Japan's prohibitively high taxes.
Japanese government officials said they will make every effort to drive domestic production to maintain technological development and protect jobs from leaving the country, though the outlook is unpromising. The industry says Japan's automobile tax system is complicated, with the rate being twice or triple that in the UK and Germany and even 49 times that in the U.S. So Japanese consumers not only pay tax upon purchase but also an annual car tax, which after 10 years total more than the original car price.
The Japanese government has been considering to cut car tax to revive the automotive market, hoping to spur Japan's annual automobile sales by 920,000 units.
In a rare show of solidarity, the industry's big three – Toyota, Nissan and Honda – and representatives from Japan's automotive industry unions and dealers rallied to demand the government to reduce the excessively high automobile tax.
Once the industry moves jobs overseas, local jobs are gone forever, said Nissan's chief operating officer as he described the unprecedented crisis.
Annual sales of new cars in Japan withered from its peak in 1990 of 7.8 million to about 4.25 million in 2011, while research reveals that young people are disinterested in buying new cars, and the situation is most severe in cities.
It's estimated that Japan's eight big carmakers' profits fall 80 billion yen whenever the yen-to-greenback exchange rate rises one yen. Akio Toyoda thinks that as the industry recovers from last year's earthquake and Thai flood, the government must push this critical momentum, with the industry asking the government to continue its preferential tax on eco-friendly cars that end next year, and reduce car-related tax to stimulate buying.
Taiwan Promotes Cross-border Cooperation in EV
Meanwhile, according to Tu Tzu-chun, Director of Industrial Development Bureau (IDB) under the Ministry of Economic Affairs (MOEA), Vice Economics Minister Huang Chung-chiou went to Japan last year to invite Nissan and Mitsubishi to join Taiwan's EV trial projects. Nissan has agreed to work with the Taichung City Government and provide its Leaf49 for the city's EV trial project.
In addition, the MOEA also recommended Taiwan's EV parts makers to Japanese carmakers to tap supply opportunities related to EVs, with the 45 recommended companies being Teco Electric, Delta electronics, Chroma ATE, Fukuta Elec. & Mach, Hua-chuang Automobile Information Technical Center, E-One Moli Energy, among others, whose products include motors, batteries, power supply, battery recharger, GPS, and so on.