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According to the data released by the China Association of Automobile Manufacturers, from January to August this year, the cumulative production of domestic commercial vehicles was 2,456,115 units, which was a cumulative decrease of 7.15% year-on-year; cumulative sales were 2,520,671 units, a year-on-year decrease of 8.85%.
East is not bright West
As the leader of domestic commercial vehicle enterprises, Foton Motors also faced considerable pressure. According to relevant data, from January to August this year, Foton Motors produced and sold commercial vehicles (including non-integrated vehicles) were 401,400 and 416,400, respectively, They declined by 3.3% and 6.7%, respectively, while sales of medium- and heavy-duty trucks dropped by 24.5%, while sales volume of light trucks and light passengers also dropped by 2.3% and 11.8% respectively.
On September 7, the Brazilian subsidiary of Foton Motor officially signed an agreement with the Brazilian State of Bahia to establish a factory in Kamassari, Bahia.
It is understood that the plant will be put into production by the end of 2013, and the production capacity will reach 30,000 vehicles per year by 2017. By then, it will employ about 1,000 people locally. According to the letter of intent, the factory will cover an area of ​​1 million square meters and is expected to produce two commercial vehicles, including a light truck and a micro-surface.
“Since January this year, we have officially sold cars through three Sao Paulo dealerships in Brazil. Our products include three light trucks with load capacities of 3.5 tons, 6.5 tons and 8.5 tons respectively. Karmazari is a gathering place for the automotive industry in Brazil. First, the factory built here will be initially in the form of CKD, that is, domestic parts will be shipped to Brazilian factories for assembly, and then the proportion of localization of parts will be gradually increased and will reach 65% or more by 2017. This is also the case. Brazil's automotive products are exempt from the high industrial product tax IPI requirements," said Foton Motor insiders to the Auto Business Daily.
It is reported that in order to expand its business in Brazil, Foton Motor also decided to start in 2013, in the next four years will establish 130 dealerships in Brazil, and additional investment of 2 billion US dollars.
Just 10 months ago, Jianghuai Automobile, another Chinese auto company that produces commercial vehicles, also decided to establish a factory in Kamassari, Bahia, Brazil. By the end of March this year, China will use it. The car company Chery Automobile also decided to establish the first automobile industrial park overseas for Chinese car companies in Brazil.
So why are Chinese car companies so passionate about Brazil?
According to industry experts, Brazil’s economy has grown rapidly in recent years, and the average annual growth rate of GDP has remained at around 7.5%. With the rapid development of the economy, Brazilian consumers’ consumption demand for cars has increased in vain. In 2010, Brazil surpassed Germany to become a global player. In the fourth largest automotive consumer market, in 2011, Brazil replaced Algeria as the largest exporter of Chinese automobiles.
Trade barriers It's not easy to say love you
According to statistics from the National Automobile Dealers Association of Brazil, Brazil had a total of 3,425,600 cars sold in 2011, while cars from China accounted for only 1.81%. Obviously, for Chinese car companies, the Brazilian market still has enormous potential for development. As a result, Chinese auto makers such as Foton, Jianghuai, Chery, Great Wall, and Lifan made plans to increase their exports to the Brazilian market, or prepare to establish an assembly plant in Brazil to further reduce vehicle costs.
However, at the end of last year, the Brazilian government implemented a policy of substantially increasing the tax rate of imported industrial products, which became the biggest obstacle for Chinese auto makers to enter the Brazilian market further.
At the 41st MERCOSUR Summit on June 29, 2011, Brazil and Argentina and other countries strongly called for SADC member countries to adopt import substitution policies and strengthen restrictions on imported products, alerting products from other regions. The industrial systems of SADC member states have caused "serious shocks."
Subsequently, on September 16 last year, the Brazilian government announced that it would impose a 30% tariff on imported industrial products. That is to say, the cost of foreign vehicles or auto parts imported into the Brazilian market will increase by at least 30%. Want to get rid of these 30% tariffs, unless the car sold in Brazil, 65% of the parts in Brazil are locally produced or from other SADC countries, auto manufacturers can enjoy tax rebate treatment.
According to the regulations, there may be a 90-day buffer period before the implementation of the new tax rate, that is, the actual implementation date of the new tax rate is December 15, 2011.
“Since the implementation of this measure by the Brazilian government, the price of imported cars in the Brazilian market has increased by 25% to 28%. Although the policy ends at the end of this year, it will not be known whether the Brazilian government will continue to implement this measure.†An industry person said with concern.
The solution to localization
“In the past when our car companies expanded overseas, in order to reduce import costs, we usually used the form of a CKD assembly plant in cooperation with local distributors, that is, to import parts and components locally and assemble them locally because of import duties on spare parts internationally. Generally lower than the vehicle import tariff, but from the perspective of the Brazilian government to adopt new tariffs, Chinese car companies want to continue to develop in Brazil, but also need to achieve local production as soon as possible.†Deputy General Secretary of the National Passenger Car Market Information Association Cui Dongshu told the Auto Business Daily reporter.
Experts in the industry pointed out that as a developing country market, Brazilian consumers still have a soft spot for economy cars. This is precisely because of the advantages of Chinese car companies whose prices are “behind the worldâ€, but after Brazil’s new tariff policy is implemented, This advantage of Chinese products has been severely weakened. The only solution to this problem is to implement localized production.
“In fact, the implementation of localized production is also a step that automobile companies must implement to expand into overseas markets. The form of CKD assembly plant is only a transitional link from purely imported vehicles to localized production, and only realized in the local area. The localized production can truly stand in this market, just as foreign auto companies enter our Chinese market,†said Cui Dongshu.
It is understood that in the international market, foreign auto giants usually enter the market of a certain country. They usually use the first vehicle to import, and then import the spare parts to assemble. Finally, they move their parts supply companies to the local strategy of implementing local production.
In March last year, a large number of Japanese auto parts SME delegations signed an agreement with the government of Danyang City, Jiangsu Province, China to establish a Japanese auto parts enterprise industrial park in Danyang Economic and Technological Development Zone to further realize the local production of Japanese auto parts in China. The technology R&D center of the Japanese auto giant Toyota is located in Changshu, Jiangsu Province.
Not long ago, Wu Dejun, deputy general manager of Chery International, told the media: “The industrial park that Chery is building in Brazil can provide components for new automakers in the future. This can meet the Brazilian government’s standards for locally assembled vehicles. The localization ratio is at least 65% to avoid paying industrial product taxes."
Zhu Yi, an engineer at China National Petroleum Institute, told the reporter that at present, the South American Community is establishing a unified technical regulation, and that Chinese auto companies should seize the opportunities brought about by the integration process of the South American Community, from a point of entry, and establish a firm foothold. The surrounding expansion will also be very convenient.
"But in order to gain a foothold, we must have two things. First, the products must meet the needs of the local market. Second, we must have our own spare parts supply system in the local area. We have no own spare parts supply system. Sooner or later it will be Extruded." Zhu Yi said.
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