China Auto Parts Makers Face Worsening Business Environment
2009-04-28 Source：english.chinabuses.com
Summarize：On Dec. 15, 2008, WTO ruled that China imposed discriminatory tariffs on auto parts & accessories coming from the USA and other countries. The ruling was resulted from the Measures for the Administrat ...
On Dec. 15, 2008, WTO ruled that China imposed discriminatory tariffs on auto parts & accessories coming from the USA and other countries. The ruling was resulted from the Measures for the Administration of Import of Automobile Components & Parts Featuring Complete Vehicles rolled out by China back in Feb. 2005. According to the measures, China would impose the same tariffs as the complete vehicles on imported parts & accessories if the total import value of the parts & accessories accounted for over 60% of the costs of the complete vehicle. However, the measures were postponed for implementation again and again for various reasons. In Mar. 2006, the USA and EU voiced their dissatisfaction and claimed that the measures were against the rules of WTO.
Three years have passed. China’s auto industry has made substantial progress. Currently, foreign enterprises are now strengthening their business presence in China. As one way to cut their costs, they have gradually increased the proportion of their local purchases.
By taking advantage of China’s large pool of technical talents and inexpensive labor costs, a host of auto parts & accessories manufacturers have set up their joint ventures or wholly owned businesses in China. In order to take a firm control of the key technologies and reduce frictions, theses enterprises also tend to take the majority shares or complete shares of their business in China.
Under such a backdrop, a host of indigenous parts & accessories manufacturers is faced with heightened pressure for further expansion from various aspects. First, the implementation of the National Ⅲ Emission Standard created a technical bottleneck for them. Second, most indigenous auto parts makers are concentrated in such areas as water tank and glass with low added value and a large number of enterprises are involved in OEM business. Third, the deepening economic slump has also dealt a heavy blow to the local enterprises. At present, a host of China’s indigenous enterprises, faced with growing inventories and cash shortages, are running under their production capacity.
Given above, an industrial reshuffle is now quietly underway. To emerge even stronger after the economic storm, the local businesses are strongly advised to tighten their account receivable management and improve their liquidity. Moreover, under permissible circumstances, they should increase their technological investments. In all, the local businesses have to beef up their own competitiveness and learn to live with the declining overseas demand for the near future at least, if not eternally.
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