On October 5, 2015, the 12 countries that negotiated the Trans-Pacific Partnership (TPP) reached a basic agreement at the ministerial meeting held in Atlanta, Georgia, and agreed to conduct free trade and regulate in a wide range of areas such as investment and intellectual property. Based on the Trans-Pacific Economic Cooperation Agreement (TPP), tariffs levied by the United States on Japanese auto parts will be completely repealed in the 15th year of the agreement’s entry into force. Full vehicle tariffs will also be revoked in the 25th year of the agreement’s entry into force. TPP will abolish the tariff of 99.9% of industrial products. Automobile manufacturing, dairy products, electronic products and the textile industry are considered to be the four industries most affected by China.
Trans-Pacific Partnership Agreement (TPP) has reached an agreement with 12 countries
TPP or will squeeze the export volume of Chinese components is not enough to form a threat
In the short term, TPP's impact on China's auto manufacturing industry is more focused on auto parts. TPP zero tariffs may squeeze China's exports of auto parts to Japan and the United States, but the impact is not serious. Given the strategic significance of the Chinese auto market in the world, Japan and US parts and components companies will not divest large-scale funds in the short term, but they will shift the production of some low-cost parts to countries with lower tariffs and zero tariffs.
Cheng Xiaodong, chief auto analyst at the National Development and Reform Commission Price Inspection Center, told NetEase that the TPP agreement will have some impact on Chinese auto parts exports to the United States and Japan, but it is not enough to pose a threat for two reasons. First, China’s auto The main exporting countries for components are China, the United States, and the Middle East. Second, China’s auto parts and components are mainly concentrated on low-value-added parts and components, lacking the competitiveness of key component production, and not having core products in overseas markets. Competitiveness, therefore, how to quickly improve the production R&D capabilities of high value-added, high-tech products in China's auto parts is the key.
TPP affects China's auto parts exports to the United States and Japan
The industrial chain from parts to vehicles is long. Even if the two major automobile manufacturers in Japan and the United States move closer together, they will not have an immediate impact on the global automobile pattern in a short period of time. Relative to the whole vehicle, the tariff reduction policy for auto parts in the TPP agreement is more direct. According to the data, the current export amount of Japan-related auto parts to the United States is around 2 trillion yen per year, as specified in the TPP agreement. Withdrawing the 2.5% tariff calculation, the United States will reduce the amount of Japan’s tariff reductions to around 50 billion yen. In the short term, the impact of the TPP agreement on the auto parts industry will become more apparent.
The removal of tariffs on auto parts will have a profound impact on the automobile industry in Japan and the United States. For this reason, Ford Motor Group jumped out against the TPP agreement at the first time. Compared to Japanese cars’ large-scale offensive in the US The car market is at a loss. Since Japan's participation in the TPP negotiations in 2013, it has agreed by default to set the longest deadline for the removal of automobile tariffs in all items, so as to ensure that the automobile industries of the two countries can be protected to the maximum extent rather than impact.
Similarly for the Chinese auto industry, auto parts will be more affected by the TPP. According to data from the China Automobile Association, China’s auto parts exports performed significantly better than vehicles. In 2014, auto exports totaled 13.8 billion U.S. dollars and auto parts exports reached 68.8 billion U.S. dollars. Major exporting countries are the United States, Japan, South Korea, and Germany. , UK and so on.
According to data from the US Bureau of Statistics in August, in the first half of this year, China’s auto parts exports to the United States increased by 16% year-on-year, with a market share of 14.3%, an increase of nearly 1 percentage point from the same period last year. According to customs statistics, from January to July this year, Tianjin Port exported auto parts worth 589 million US dollars, exported to the United States 237 million US dollars, an increase of 61.4%; Japan exported to 108 million US dollars. The main reason for the growth of auto parts exports is that the investment in foreign auto parts auto parts in China has increased year by year, resulting in rapid growth in exports. If the TPP implementation of zero tax rates, some car companies may face the transfer of auto parts production lines to Southeast Asian countries, such as tire manufacturing, Southeast Asian countries with natural rubber raw materials have an advantage. This does have an impact on the export of Chinese auto parts to the United States and Japan.
TPP does not pose a threat to Chinese parts
Although the TPP agreement may have an impact on China’s auto parts exports to the United States and Japan. However, the level of domestic auto parts manufacturing has improved. The manufacturing level of parts such as axles, frames, steering, brakes, electronics and appliances, trims, passenger protection systems, and exhaust systems can meet the standards of foreign automobile production. The manufacturing cost is only 10% of that of similar foreign products. %. High export competitiveness.
However, at present, China's auto parts rely mainly on prices to form export advantages. After the implementation of TPP, the parts and components of Japanese companies will have more price advantages, thus squeezing the living space for Chinese parts exports. However, the U.S. market is not the only market for China's auto parts exports. The auto parts production is dominated by the local auto market. The impact of TPP on auto parts in China is far from being a deadly threat.
Cheng Xiaodong said that the Chinese auto market is still driven mainly by domestic demand, and the prices of complete vehicles and parts are open. The TPP agreement will not cause too much impact on China's auto parts market. In the future, as the parts and components market matures, it may also have More open policies to maintain the circulation of the auto parts market.
The core competitiveness of local component production needs to be improved
Cheng Xiaodong told NetEase that the impact of TPP on Chinese auto parts will not pose a threat, but for Chinese auto parts companies, the future development situation is even more severe than the entire vehicle market. “At present, China’s local parts and components companies still focus on the production of low-value-added components, such as tires, engine brakes, etc. Key high-value-added components, such as engine components and electronic parts, are still mainly imported. With production capacity, it is therefore not competitive in overseas markets, and even less into the US market, and therefore will not be affected by the TPP agreement."
The primary task of China's spare parts industry is the development of core components, technology reserves, and production processes. To get rid of ways that can only rely on price for profit, can we have truly effective competitiveness.
At present, in China's auto parts market, the number of foreign-funded background enterprises accounts for 20% of the number of large-scale enterprises, and the market share accounts for more than 70%. Chinese-funded parts and components companies only account for 30% of the market share, and they show a downward trend, of which 90% are Products are concentrated in low-end areas. Although automotive parts produced based on the automotive market will not be transferred in large scale due to the TPP agreement, the competitiveness of the body parts enterprises is very weak. In the long run, how will the tariffs of various countries in the future be adjusted and unknown? Apart from price advantage, China's parts and components companies need more core competitiveness to cope with the unpredictable global economic structure.
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