Howes: China readies rule changes on autos — right?
All of a sudden, the Chinese are willing to change the rules protecting their sprawling auto industry.
President Xi Jinping says he’s open to reducing 25-percent tariffs on foreign-made cars, trucks and SUVs — which might actually mean something if a company like General Motors Co. imported more than 200 U.S.-built Chevrolet Camaros into China to complement the 4 million vehicles it built and sold there last year.
The country’s top policy planning commission says it would be open to full foreign ownership of auto companies in China. If it actually happened — a very large “if” in this transpacific belly-bumping — it would be a reversal of more than a generation of partnership between, say, the likes of GM, Ford Motor Co. and state-owned enterprises.
Why the sudden reversal? Depends on who’s asking. To hear President Donald Trump and his cheering section, it’s all about the pressure his administration is bringing to bear with a $150 billion-worth tariff threat. China needs the rich U.S. market more than the United States needs Chinese consumers — and if the export numbers are any indication, that’s true.
In dollar terms, Chinese producers export more to the United States than U.S. producers export to China. And if that’s the only measure (the one preferred by Team Trump), well, case closed. Or is it?
Probably not when it comes to autos. There’s a reason Xi and his bureaucrats suddenly appear so magnanimous about their bedrock auto industry spanning the largest vehicle market on the planet. After roughly two decades of partnership with GM, Ford, Volkswagen AG and other members of the global automotive club, indigenous automakers are maturing — fast.
Proposing to possibly level an unlevel playing field is far easier when Chinese companies are acquiring global automotive assets and turning them around (Geely’s 2010 purchase of Volvo Cars Ltd.) or taking major ownership positions (Geely’s Tenaciou3 Prospect Investment Ltd. owns 9.7 percent of Daimler AG, one of Germany’s crown automotive jewels ).
Or preparing to be the first Chinese automaker to export vehicles to the rich U.S. market. Guangzhou Automobile Group Motor Co. Ltd. used this year’s Detroit auto show to unveil plans to bring its GAC GS8, an upscale seven-seat SUV, to the U.S. market by the end of the year.
These are not passive players content to forever play second banana to the big boys and girls from Germany, Japan and the United States. They’re formidable competitors who have quickly learned from their foreign partners. And they’re far more willing to acquire their way into the big leagues than, say, the patient Japanese. Slow and steady? Not so much.
Which may explain the sudden spasms of flexibility apparently coming from Beijing. For now, the geo-politics of the moment recommend it. But on the ground, their maturing auto industry means that it’s a risk worth taking — particularly if doing so raises real possibility of Chinese access to the rich U.S. market.
Promising to drop import tariffs on American-built metal could be nothing more than a bargaining ploy that evaporates into the details if and when things get serious. And if it doesn’t, and becomes reality, would it reverse the tide of vehicle production flow — i.e., building lots of pricey product in higher-cost United States and Germany and shipping it halfway around the world?
Doubtful. The Art of the Deal meets the Chinese Way, and it’s not at all clear how that might end up. Xi signaling to Trump his openness to reducing import tariffs on foreign cars arguably is akin to the Chinese president giving his American counterpart the sleeves from his vest and a “win” he can tout on Twitter.
Same for full foreign ownership of automakers. Given the trends of the past, say, eight years, what’s more likely: that an American automaker already well-positioned in China buys a Chinese automaker outright? Or that a Chinese partner, now in metaphoric young adulthood, marshals local capital and buys the foreigners right out of the market and into the United States?
There are all sorts of political reasons, especially over the next few years, why that probably would not happen. But that doesn’t mean it couldn’t, or that it never will. If Trump is playing a long game here, the Chinese arguably are playing a longer one.
That’s one reason why this town’s automakers are publicly silent about what appear to be big concessions by the Chinese. They’ve spent enough time with them to know few things can be taken at face value — and that includes telling an American president what he wants to hear.
Follow Daniel Howes on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.