Industrial Policy Updates

Argentina Takes Actions to Balance Automobile Trade

In February the Argentinean government announced a policy to restrict imports of luxury cars, with the hope of reducing the country's automobile imports while also creating favorable conditions for the development of the domestic auto industry.

According to official statistics, Argentina's auto imports soared by 40% in 2010. February's announcement was made to ensure effective control over automobile imports, which continued to rise despite the government's call for lower imports of luxury cars.

“So far, it seems that most car dealers have no plans to cut their imports. That's why the government is now taking tough actions to control the situation,” said an official at the Ministry of Industry and Trade.

The high-priced cars that could be affected under this policy include BMW, Audi, Mercedes Benz, Kia, Chrysler, Mitsubishi, Lexus, Subaru, Volvo, Jaguar, Porsche, and Alfa Romeo.

Industry and Trade Minister Deborah Giorgi addressed a letter to importers last December, asking them to reduce imports to help the government cut Argentina's auto trade deficit by 20%. Despite record domestic auto production during the same period, auto imports from Europe, Asia, and the United States soared in 2010 along with economic growth in the country.

Australia to Encourage Eco-friendly Transportation
In February the Sidney City Government announced an “Everlasting Green City Plan” to develop Sidney into one of the most eco-friendly cities in the world.

The plan will be supported with a budget of A$2 billion for construction of green public facilities including solar buidlings, energy-saving road lamps, and battery-recharging stations for electric vehicles (EV) in the next two decades.

Australia is expected to become a major EV market, with private spending in the sector likely to exceed A$4.3 billion by 2020, according to an international market research institution.

“Electric cars will replace more than 100,000 petrol-driven cars in the coming decade, and key beneficiaries would include top Australian power retailers Origin Energy and AGL Energy,” said Ezra Beeman, managing director of the Sydney-based consulting firm Energeia.

Builders of EV power-charging stations would also benefit, he said.

“Australia is a very exciting market for the EV industry, given the country's early active actions in this area,” he added. Around 109,000 units of EV would be on Australian roads by 2020 (compared to only 80 now), and the number could soar to 3.4 million by 2030, which would represent a quarter of the cars in the country.

However, an absence of consumer subsidies for EV purchases and limited charging infrastructure could slow mass adoption of EV cars in Australia. Also, immature battery and charging technology as well as Australia's lack of support for adoption are barriers to consumers switching to the EV.

The EV industry in Australia will have a relatively modest start. As the technology matures and infrastructure is put in place, EVs will begin to displace internal combustion cars as the major transportation vehicle of most consumers starting in 2020, according to Energeia's forecast.

　

The Dominican Republic to Cut Import Duties on Automobiles Shipped From the EU
In January the Dominican Republic signed a contract with the European Union (EU), in accordance with the DR-CAFTA (Dominican Republic–Central America Free Trade Agreement), to offer favorable duties to, among others, automobiles and auto parts shipped from the European Union.

Under the contract, the country's import tax on ambulances and hearses shipped from Europe will be reduced from the current 4% to zero in 2013, that on golf carts and snowmobiles from the current 20%to 15% in 2015, that on jeeps from the current 20% to 15% in 2019, and that on station wagons from the current 20% to 15% in 2019. Meanwhile, the import tax on auto parts such as steering wheels, chassis, transmissions, gearboxes, and bumpers will be cut from the current 8% to 4% in 2011.

The DR-CAFTA is a free trade agreement (a legal treaty under international law, but not under United States law). Originally, named CAFTA, the agreement comprised the United States and the Central American countries of Costa Rica, El Salvador, Guatemela, Hondurous, and Nicaragua. In 2004, when the Dominican Republic joined the negotiations, the agreement was renamed DR-CAFTA.

Mexico to Reduce Imports of Used Cars Through Stricter Safety Requirements
The Mexican government says it may tighten safety rules and emission standards for imported used cars, a move made in view of the rapid growth of used car imports from the United States.

According to the Mexican Association of Auto Distributors (MAAD), Mexico imported an estimated 430,000 used cars from the United States in 2010, which was more than half of the 820,406 new cars sold in the country that year. A third of the cars sold in Mexico are used. The government would like to restrict sales of old cars, which were called “junkers” in the United States, to help boost the sales of new cars in the country. “The junkers distorted the Mexican car market, making it more difficult for Mexicans to sell their used cars in order to buy new ones,” said Guillermo Rosales, head of government relations for MAAD.

While Mexican automakers face headwinds in boosting domestic sales, the Mexican auto industry continues to flex its muscles as an automobile export platform, especially for neighboring countries. In January, auto exports from Mexico to key markets such as the United States grew at a double-digit pace compared with the same month a year earlier, according to the Mexican Automobile Industry Association (AMIA).

Exports to Canada, Latin America, Europe, Asia, and Africa also rose, although the non-American markets remained relatively small, as the AMIA statistics show.

Production of cars and light trucks in Mexico rose 21% in January to 199,310 vehicles, while exports increased 45% to 165,046 units. However, domestic sales grew at a slower pace that month, rising 7.3% to 68,766 units, AMIA said. Auto parts, which account for the bulk of Mexico's exports in the sector, grew 70.6% in 2010.

　　

The Philippines seeks new motor vehicle development plan

The Board of Investments (BoI) of the Philippines is drafting a new auto industrial development plan, called the Motor Vehicle Development Program (MVDP). The program will serve as the government guideline on making the country's automobile and auto parts manufacturing industry more competitive.

The new plan is coupled with a proposal for setting up the Automotive Industry Development Council, also called “Auto Council,” to oversee the implementation of the MVDP as well as to coordinate policies, rules, regulations, and other concerns.

The new MVDP is aimed at addressing the specific advantage of the Philippine auto industry relative to other ASEAN (Association of the Southeast Asian Nations) countries. The plan notes that Indonesia has low cost; Thailand the eco-car, and Malaysia a national car brand.

Russia Encourages Partnership With Foreign Auto Players to Boost Domestic Industry
Russian automaker Sollers OJSC signed a memorandum of understanding with US-based Ford Motor Company, according to which the parties intend to launch a new 50:50-owned joint venture for the production and distribution of Ford vehicles in Russia. The deal follows an announcement by the Russian government last year that the Russian car industry couldn't survive without partnerships with global players.

“The benefits provided by the proposed joint venture and the new industrial assembly policy will allow Ford to create a profitably growing business in Russia and help to strengthen the Russian automotive industry,” said Stephen Odell, chairman and CEO of Ford of Europe.

“We are inspired by the opportunity to work with Ford,” said Vadim Shvetsov, general director of Sollers. “We are confident that our mutual efforts in the development of manufacturing facilities, new product launches, and localization of parts content will ensure success for our strategy and a leading position for the future joint venture company in the Russian market.”

The joint venture, called Ford Sollers, is scheduled to start operations by the end of this year.?In order to benefit from the new Russian automotive policy framework, Ford and Sollers have applied to the Russian government for participation in the new industrial assembly program.

The proposed joint venture will include Ford and Sollers production facilities both in Vsevolozhsk (St. Petersburg region) and in the Republic of Tatarstan. The two partners will use these facilities to manufacture a range of Ford passenger cars and light commercial vehicles.

In 2002, Ford became the first foreign auto manufacturer to produce cars in Russia and has since built a solid base in the country. Ford brings to the proposed joint venture its manufacturing experience and an extensive existing dealer network in the Russian market. The proposed joint venture will be able to produce all car models under the One Ford plan.

Sollers, the second largest producer of passenger and light commercial vehicles in Russia, has considerable experience in the Russian automotive industry. It will support the proposed joint venture through its manufacturing capabilities, knowledge of the Russian market, and its experience both in distribution and working with the Russian supply base.

Taiwan Requests Zero Import Duty for Car Shipments to China
The Taiwanese government plans to ask China to allow the tariff-free import of up to 100,000 Taiwan made cars a year, with the condition that at least 50% of the parts are made in Taiwan. If the request is approved, as expected, Taiwan's annual auto production value could see a more than NT$100 million annual benefit.

This summer the two sides will start the next round of negotiations on mutual tariff concessions related to the Economic Cooperation Framework Agreement (ECFA). The talks will cover over 5,000 items. The first round of tariff concessions came into effect at the start of this year, includes reduced tariffs on 267 import items from Taiwan (among which only 33 items are of the auto industry and all of those are auto parts).

The proposed annual quota is based on the formula set by the two sides during their negotiations last year when they agreed to offer favorable import duties for all cars shipped between each other in accordance with an annual quota of up to 25% of cars imported annually. In 2010, China imported around 400,000 cars. For Taiwan's car shipments to enjoy the favorable import duty, its annual quota would need to be around 100,000 units (25% of China's annual car imports).