SHANGHAI -- General Motors has stopped assembling a third model in China.
The Buick Royaum sedan, which was being assembled at GM's joint venture here, now will be sold only as an imported model in China, GM China spokesman Henry Wong says.
GM's main reason for stopping production is a regulation enacted this year that raised the tax on imported kits from the 10 percent rate charged for parts to the 25 percent rate charged for assembled vehicles.
In the past, automakers could import vehicles in pieces and assemble them in China, paying the lower rate for imported components. The regulation closed that loophole.
In May, GM halted local assembly of two other luxury models, the Cadillac CTS sedan and SRX SUV.
Wong explained the halt this way: "With new products coming onstream and other Buick products in high demand, Shanghai GM's capacity can be better optimized with the Royaum being imported."
Sales of the large sedan also have been slow.
Local assembly of the Royaum from kits imported from Australia began in China in November 2004. Since then, GM has shipped 4,700 kits to China, Wong says. The Royaum is based on the Statesman sedan produced at GM's Australian subsidiary, GM Holden Ltd.
For comparison, the Toyota Crown, which Toyota began assembling in China in March 2005, sold 24,205 units in the first seven months of 2006, according to Automotive Resources Asia, a consulting firm in Shanghai.
The aim of the new import-tax regulation is to force foreign automakers to quickly localize their purchase of components, which helps local companies improve their quality, says Sun Jian, a vice president of A.T. Kearney in Shanghai.
Local sourcing of components for luxury models has proved challenging in China. Local companies often have lower quality standards than those required by international automakers.
Still, other automakers have continued to import luxury-model kits despite the higher taxes, Sun says.
Says Sun: "The new regulation didn't stop BMW or Mercedes-Benz because they are determined to localize. They have a vision that in the longer term to develop the (China) supply base will help them globally as well. If you qualify suppliers here, they can someday supply you globally."
You may e-mail Alysha Webb at [email protected]