For the past seven years China has incentivised foreign car companies building plants in the country by giving them certain benefits, such as smaller tariffs on imported equipment. It now appears that the free ride is over, come 30 January 2012. Companies like BMW, General Motors, Honda and Volkswagen have factories in China.
An announcement by the National Reform and Development Commission (NRDC) and the Ministry of Commerce says those benefits will no longer apply from that date forward. State information bureau Xinhua says this is “because of the need of the healthy development of domestic auto making”. There were no specific details as to how this would be done, but some analysts reckon companies with plans to expand or build new sites, such as AudiAG, may end up paying more than before.
China became the world’s largest market for cars in 2009, taking over from the United States. Last month alone about 1.66 million were sold in China, compared to around 50 000 in South Africa. Of course there are 1.5 billion people living in mainland China, as opposed to 50 million in Mzansi. The Asian giant is the world’s most populous, while Mzansi is number 24 on the list, just ahead of South Korea and one behind Italy which has 60 million people.
I guess we are reverting towards more protectionism again, especially considering just a couple of weeks ago China announced it will be slapping extra import duties on cars coming from the United States.