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At China port, tariff drop a salve for hard-hit traders of American cars

Reuters  |  TIANJIN, China/SHANGHAI 

By Sun and Adam Jourdan

TIANJIN, China/(Reuters) - In the Chinese port city of Tianjin, grey market traders of American-made cars, badly stung by a scything trade war and punitive tit-for-tat tariffs, are scrambling to take advantage of an opportunity they fear may prove only temporary.

At a car "supermarket" near the city's busy harbour, importers told they were rushing to get "Made in America" cars through customs and revving up orders after temporarily cut tariffs on U.S. autos from Jan. 1.

The activity at the port - after a freeze since hit U.S. auto imports with a 40 percent tariff last July - illustrates how ebbs and flows in the protracted trade war between and are impacting global businesses.

"Our business was harshly hit in 2018. Sales fell steeply and we were forced to hold cars in bonded zones to wait for tariffs to be cut," said Kevin Li, a at the port whose firm brings in U.S.-made luxury sport utility vehicles (SUVs).

"Now we are discussing with dealers in the U.S. to start importing more cars once again."

The higher tariffs have hit premium carmakers who import a large portion of the vehicles they sell in China, including Inc, Ford Motor Co's Lincoln brand, and Germany's and Daimler AG, which both have in the

Chinese and U.S. trade negotiators have been locked in talks in this week in a bid to end the trade tensions that have rocked markets. Those talks wrapped up on Wednesday, with hopes growing that a deal could be struck.

The two countries' leaders struck a 90-day trade truce last month after talks on the sidelines of the meeting in Argentina, which saw China's steep levies on autos trimmed back for a three-month period until the end of March.

In the first ten months of 2018, U.S. passenger vehicle exports to China, excluding those for public transport, were just under $6 billion, down from over $8.5 billion in the same period the year before.

Since the middle of last year, when raised tariffs, U.S. to have plunged between 35-55 percent each month versus the year before, far more steeply than in the first half of the year.

Shortly after the Chinese announcement, Tesla, parent Daimler and cut their prices for imported U.S.-made cars to make their cars more affordable.

An at China's main car dealers' association said he expected formal imports by carmakers to revive over the next few months given the lower tariffs. could not immediately confirm if numbers had already started to climb.

BUYERS RETURN

Car dealers at the port, however, said customers had started to return late last month.

"We notice significantly more customers coming since the announcement of the tariff cut on U.S.-made cars," said Peter Liu, a at the port, who imports cars from the including and

Liu's firm is offering 10-15 percent discount to customers to bring in much-needed cashflow after a tough six months with his cars stuck paying fees in portside parking lots to avoid the steep levies.

"The tariff cut on U.S.-made cars has pushed us to now clear our cars parked in bonded zone through customs. We already successfully submitted documents to clear two Benz GLS 450s," Liu said.

said he was bringing 20 SUVs through customs, making use of the tariff drop "window" to bring in cars even without firm orders.

That was a gamble, with overall demand still weak, he acknowledged.

Data shows China's domestic likely contracted last year for the first time since 1990 and analysts say it isn't likely to turn around soon.

"There is a risk that won't be that good in the first quarter, but we need to make use of the tariff drop," he said. "We are paying for the tariff before receiving orders."

WINDOW CLOSING?

The grey market trade in is only a part of China's auto market, the world's largest, but it gives an important insight into the auto import trade. While carmakers prefer importing their own vehicles, Beijing has been encouraging alternative channels, fuelling grey market growth.

This grey market channel made up roughly 14 percent of all imported cars in China in 2017, almost double the 7.7 percent in 2014, according to data from China's biggest auto importer, Sinomach Automobile Co Ltd.

is the biggest port in China in terms of parallel car imports, bringing in around 70 percent of country's overall parallel car imports, according to a report.

Dealers estimate there are more than 10,000 U.S.-made cars sitting in the port's bonded zones.

With no guarantee the lower tariff window would not close again at the end of March, firms were rushing to bring cars in, dealers and industry insiders said.

Su Hui, a senior at the China Automobile Dealers Association's parallel car chamber, said it took around two months to complete the process from ordering a U.S.-made car to completing customs clearance in China.

"So there is not much time for importers," he said.

The rush could also put pressure on customs in major Chinese ports, including Tianjin, and

Leo Liu, a Shanghai-based dealer at who sells 700 U.S.-imported cars a year, told his firm was clearing 100 vehicles at Waigaoqiao since the tariff cut announcement.

"But there are so many uncertainties, so we need to hurry up," Liu told Reuters.

(Reporting by Sun in and Adam Jourdan in Shanghai, additional reporting by Shanghai newsroom; Editing by )

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, January 10 2019. 11:44 IST
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