Ivan Horditch, Secretary-General of the European Automobile Industry Association (ACEA), has proposed that the "Measures" should take into account the differences in localization across various models. He suggested introducing a "tolerance period" of 2 to 3 years for new car models, acknowledging that it takes time for local supply chains to catch up and meet the required localization rates.
Speaking during an interview with *First Financial Daily*, Horditch emphasized that arbitration through the WTO is the last resort, and the EU hopes to resolve the dispute through negotiation and diplomacy. This statement came amid growing tensions between China and European automakers over the implementation of the "Administrative Measures for the Import of Auto Parts That Constitute Vehicle Characteristics."
The EU expressed concerns that these measures could restrict European automakers operating in joint ventures in China. According to the rules, components that meet certain thresholds—such as price percentages or assembly levels—will be classified as vehicle parts, subjecting them to higher tariffs. This could significantly impact the profitability of exporting auto parts to China, as companies would no longer benefit from preferential treatment under component import rules.
Horditch highlighted that European automakers are facing challenges due to complex procedures and uncertainty in import pricing. The tax rate on imported parts can vary depending on the localization level of the final product, creating financial unpredictability. Additionally, the customs clearance process involves lengthy audits and settlements, adding administrative burdens for companies.
He also pointed out that some European models, like Beijing Mercedes-Benz, are struggling to meet localization requirements and may face production shutdowns. In contrast, Japanese and South Korean automakers have managed to maintain better control over core components, making the impact less severe.
Analysts suggest that China’s policy aims to boost domestic production by encouraging the localization of key parts. The country uses a value-added threshold of at least 40% to determine whether a product qualifies as domestically produced. While the Chinese government insists this is a transitional measure to support its auto industry, the EU argues it may violate WTO principles.
Despite the tension, both sides remain open to dialogue. Horditch reiterated that the goal is to find a diplomatic solution before considering legal action. Some experts believe China might adjust specific clauses or offer temporary grace periods to ease the transition, but significant concessions are unlikely.
At a recent forum, Zhang Xiaoyu of the China Automobile Engineering Association stated that the "Measures" are intended to protect and develop China's auto parts industry during a critical phase. He added that the policy will not hinder foreign trade or investment, but all imported parts must comply with the same rules as vehicles.
As the situation continues to evolve, the focus remains on finding a balanced approach that supports both China's industrial goals and the interests of international automakers.
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