China to Cut Some Auto Tariffs From 25% to 15%

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According to China’s official news agency, Xinhua, the nation will cut tariffs for some cars and car parts. The largest reduction among those announced was from 25% to 15%.

Xinhua reported:

China will cut import tariffs on vehicles and auto parts starting July 1, the Ministry of Finance announced Tuesday.

For car imports, the 25-percent tariff levied on 135 items and the 20-percent duty on four items will both be slashed to 15 percent.

Import tariffs for 79 items of auto parts will be reduced to 6 percent from the current levels of 8 percent, 10 percent, 15 percent, 20 percent, and 25 percent.

It is questionable how much this will help America’s largest car companies. Most U.S. cars made for sale in China, the world’s largest car market, are manufactured by joint venture companies, which are majority-owned by local partners. General Motors Co. (NYSE: GM) has several joint ventures to make and market cars, the largest of which is with Chinese auto giant SAIC. That means China’s change in tariffs is little more than a token for companies like GM.

Passenger car sales in China last year were just under 29 million. This is almost double the size of the U.S. market. However, the once rapidly growing car industry has slowed. Car sales in the People’s Republic were up only 3% last year, barely better than U.S. market growth.

A better signal of China’s policy to U.S. car companies would be a chance for them to take majority stakes in the local joint ventures, thus giving more chance for larger profits. This also could help untether the American companies from what is in essence national government control, which in almost all cases favors the Chinese partner.

The cut in tariffs does not mean much to GM, Ford or Fiat Chrysler.

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