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Legislating Automotive Policies Can be improved

Jan 21, 2020 | By

The market share of domestic cars has been declining in recent years, from 83% at the highest peak to 53% last year. National industry players are all worried about starting from this year to the legislators and the Ministry of Finance to reduce tariffs on auto components. The Ministry of Economic Affairs had proposed 23 components, and finally adjusted them to nine items without domestic production system. The tax rate was reduced from the original range of 5% to 17.5% to 0 to 10%, and the assessment of tax expenditure considered that the tax could show a net increase. It was also negotiated by the inter-ministerial meeting, but it was not discussed in the Legislative Yuan until late November. In the end, because car dealers may not cut prices and the general election is imminent, legislators are too busy to consider factors such as elections.

The problem is that compared with the current rapid loss of domestic car market share, the domestic car market share fell below 60% in 2017 and fell to 52% in the first eight months of this year. The market share in October and November has been surpassed by imported cars Less than half (death cross), even the small domestic market of domestic cars has lost the most basic economic scale. I am afraid that it will follow in the footsteps of the closure of the domestic auto industry at the end of 2017 due to improper auto tariff policies in Australia. The supply chain of related components has caused huge impacts, including the sharp decline in the output value of the manufacturing industry, and the large number of job losses of the automotive industry. It cannot be ignored.

Looking back at the adjustment of tariffs on automobiles and components, China's accession to the WTO in 2002 has reduced import tariffs on automobile imports from 30% to 17.5%, which are indeed lower than Malaysia (30%), India (60%), Pakistan (35%), Mexico (35%), Thailand (above 70%) and other countries; but after 17 years, the tariffs on imported parts have not been reduced in proportion to the vehicle tax rate. It has become one of the factors that caused the sales of imported cars to surpass that of domestic cars. Compared with Japan 's zero-imported engine parts, 8% in South Korea, 10% in China, Thailand, and Malaysia, and the imposition of a higher tariff is equivalent to encouraging multinational automobile manufacturers to establish production plants in their homeland. International rivals.

The Ministry of Finance stated that the original tariff on auto parts (such as engines) was set at 17.5%, mainly considering that engines are the key components of automobiles. It is indeed reasonable to reserve space for domestic production and research and development of components, but for more than a decade, domestic still The inability to produce some key components and rely on imports proves that protection has not fully achieved its purpose, but has made domestic cars less competitive due to the protection of components (the same tariff rate). As for the parts that domestic manufacturers can produce, they have the advantages of a small number of diverse and flexible manufacturing, high quality and cost competitiveness. After continuously investing in research and development and upgrading technology, they have already become internationally competitive, and the output value even exceeds domestically produced vehicles. Exports account for more than 90%, and the amount of exports each year continues to expand. In 2017, it reached a record high of 214.9 billion yuan. Therefore, it has sufficient strength to face the challenge of reducing tariffs on components and parts. Negotiations were made to reduce tariffs on parts and components to increase exports.
Therefore, based on the international norms of "tariffs allow discrimination, no mainland tax", and the reason that the competitiveness of finished products is lowered due to the high cost of component tax burdens, domestic automakers are not asking the government to return to the era of tariff protection. In a competitive market, the cost level is critical. The government has a responsibility to help the domestic car industry reduce costs through the reduction of parts tariffs, and pass legislation as soon as possible and apply retroactively.

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