New rules to boost Chinese domestic partsmakers

By Alysha Webb, Automotive News Europe

China's new import tax regulations create opportunities for suppliers already manufacturing in the country.

But suppliers outside of China could lose business as automakers look to source locally to avoid the taxes.

“Component producers will be forced to come to China or lose business,” said Jan Borgonjon, president of Beijing-based InterChina Consulting.

Said Jorge Buchholz, CEO of Sinoc Automotive Technology: “If automakers are high volume, now they have to consider to localize production. Supplier companies which are already here get additional business from this regulation.”

Sinoc's customers in China include Volkswagen.

China imported $11.27 billion (about E8.7 billion) worth of automotive components last year, including $2.74 billion in engines and engine components.

Under the new regulations, those engine imports could end up causing a car assembled in China to be considered an import and face a 30 percent tax rather than the 15 percent rate for components.

That's good news for Beijing-based camshaft maker Asimco Technologies. Asimco is building five new plants to meet what it anticipates will be a flood of demand from automakers.

“This intensifies the localization [so] it benefits us,” said Asimco CEO Jack Perkowski.

Delphi China spokesman Jay Jiang said: “We view this regulation positively.”

Delphi has 11 manufacturing operations in China making everything from electronics to steering systems.

Not all partsmakers will benefit equally from the policy, which only covers certain components.

Some big suppliers, such France's Valeo, won't be affected because the parts it makes in China - mainly safety components - are not covered in the regulations.

“With our parts, there is no impact,” said Ali Ordoobadi, Valeo's group vice president for China. “But it certainly impacts those who make those parts. For those in China, the impact is positive. For those not in China, it makes the decision to come to China faster.”

Longer term, the new regulation should benefit automakers by giving them a larger base of qualified local suppliers.

Said Shah Firoozi, president of PAC Project Advisors International Ltd., a Shanghai-based consultancy: “It is driving the local suppliers to become globally competitive quality-wise and also technological-wise.”

From Automotive News Europe