After the tax reduction, the MFN tariff rate for all auto parts in China is 6%. Industry analysts said that the impact of tariff cuts on auto parts will have limited impact on domestic manufacturers.
Regarding the reduction of tariffs on auto parts, a number of listed companies responded through an interactive platform for investor relations.
Dongxi shares said that the country’s reduction of import tariffs on finished vehicles and parts will not affect the company for the time being. Baolong Technology stated that the tariff reduction has no direct impact on the company and that the resolution of relevant issues is beneficial to the company’s development in North America; Wolong Electric said that the drop in tariffs on imported cars has no significant effect on the company's performance. Precision Forging Technology said that at the present stage, the company's products exceed 20% of exports, indicating that the company's products are already highly competitive, and the related tax rate policy has had little impact.
In addition, the China Securities Journal reporter learned from a number of listed companies involved in gearbox, engine parts and automotive electronics that the impact of tariff cuts on the business is not obvious.
According to BOC International, the tax rate has been reduced to 6%, and the import cost of most parts and components is expected to fall by 3.6%. In 2017, major imported auto parts in China include gearboxes and their parts, engine parts, automotive lighting and signal devices, and automotive electronics.
An auto analyst at a medium-sized brokerage told the China Securities Journal that tariff cuts have little effect on domestic parts and components manufacturers because most of the auto parts and components have already been domesticated, and only a few key components are imported. Domestic production of auto parts is at the mid-end, and imported auto parts are mainly high-end, which is a competition of different categories.
Huatai Securities stated that according to the data from the China Chamber of Commerce for Industry and Commerce, total imported automobile parts in China totaled approximately 37 billion U.S. dollars in 2017. It can be estimated that the imported parts and components accounted for an average of 9% of the vehicle's average material cost, that is, the proportion of homemade car parts made in China. About 91%.
CICC believes that for most of the parts and components, the decline in tariff rates will not make up for the increase in freight and insurance costs, so it still does not have import economy. The automaker will try to require the parts and components companies to set up factories nearby. The use of imported parts will lengthen the supply cycle, and there will be risks that will affect the production schedule.
Participate in global competition
With the improvement of the technological level of domestic enterprises and the reduction of production costs, many parts and components manufacturers have expanded to complete vehicle companies and participate in international competition. In response to a reporter’s question, the person in charge of the Office of the Customs Tariff Commission of the State Council said: “Tariffs are a means of protection for compliance, but tariff protection should be moderate. Decreasing automobile import tariffs will help industries to strengthen competition, adjust the structure, and accelerate restructuring.”
According to the Oriental Wealth Choice data, among the 128 auto parts listed companies in Shanghai and Shenzhen, 34 companies accounted for more than 30% of overseas revenue in 2017, of which 20 companies accounted for more than 50%. Dishengli, Steyr, and Rich Electronics all exceeded 90%.
Changjiang Securities said that in 2016, the overseas business income of China's auto parts industry reached 134.82 billion yuan, an increase of 34.5% year-on-year. From 2011 to 2016, the compound annual growth rate of overseas business income was 42.4%, which was much higher than the compound annual growth rate of component total revenue of 14.8% (excluding the new shares in the current year and including Huayu Automobile and Weichai Power); The proportion of total operating revenue rose from 9.4% to 27.5%.
CICC believes that the current tariff rate for most auto parts is only 10% relative to the tariff rate of 25% of the entire vehicle. With the demographic dividend, the competitiveness of China's spare parts enterprises that have focused on the main business for many years has gradually increased, both internal and external. , automotive glass, shock absorption and other sub-sectors gradually emerged from a number of globally competitive auto parts leading enterprises, with the opening of the Chinese auto industry, these parts and components companies are expected to further increase market share.
Taking Fuyao Glass as an example, its products have been certified and used by top global auto manufacturers and major auto manufacturers, including Bentley, Mercedes-Benz, BMW, Audi, GM, Toyota, Volkswagen, and Ford. The proportion of the company's overseas business income steadily rose from 28.13% in 2009 to 35.36% in 2017.
