SHANGHAI -- China will lift tariffs on some auto parts from April, according to government rules issued Wednesday that are expected to raise costs for such foreign players as Volkswagen AG and General Motors.
From April 1, importing all of a vehicle's parts would incur the tariff imposed on assembled vehicles, not the lower one that applies to parts, according to rules published on the customs bureau's Web site www.customs.gov.cn.
Importing a vehicle attracts an average tariff of 30 percent, analysts say. The tariff on parts is 15 percent.
Vehicles completed abroad and then partly disassembled before being brought into China would also attract the higher rate, the bureau said, as would importing a combination of major assemblies, such as the chassis and engine.
Importing all the parts for a car is called complete knockdown, or CKD. Disassembling a car before importation is semiknockdown, or SKD.
Joint ventures between foreign and Chinese carmakers often rely on such methods, even though they have been gradually using more domestically made parts.
"Sino-foreign joint ventures need to import CKD and SKD kits particularly when they push out new models," said auto analyst Shi Zhonghua at China Securities. Local parts are substituted later.
"So the new rules will have an impact on such ventures, though the tightening mainly targets plants that are merely performing assembly," he said.
The rules will tighten further on July 1, when importing 60 percent of a vehicle's parts, by value, would attract the higher tariff, according to the bureau's Web site.
Xu Xiang, a senior auto analyst at China Southern Securities, said the government was trying to prop up the domestic industry, which is suffering from unexpectedly slow growth, and promote its technical development.
"By setting this restriction, the government will clamp down on what it deems unfair competition," said Xu.
"The move will encourage home-grown companies to do more research into technological improvements, instead of just acting as assembly plants."
China has pledged to slash tariffs on imported vehicles to 25 percent by July 2006 as part of commitments it made on joining the World Trade Organization.
Wednesday's move is Beijing's latest effort to foster a viable local auto industry, now dominated by foreign cars.
A government policy announced in June sought more technical innovation at Chinese auto companies, with the hope of incubating international brands that could eventually compete overseas.
Competition in China is mounting as the likes of Ford Motor Co., Nissan Motor Co. Ltd. and Toyota Motor Corp. invest $13 billion to triple annual capacity to 6 million cars by 2010.
Domestic car prices have been falling for years as automakers have slashed prices to get larger market shares.
But analysts expect China's car market to grow just 10 percent in 2005 after rising 15.2 percent in 2004 to 2.33 million units.
China imported 177,000 vehicles in 2004, up 2.6 percent from 2003, with cars accounting for about two-thirds of the imports, state media have said.
However, bulging domestic output reduced the share of imported vehicles in China to 3.7 percent in 2004, down from about 6 percent three years ago, analysts say.
Still, actual import figures could be higher, as many companies import all of the parts for cars that they merely assemble locally, analysts said.