Abstract China is paying more subsidies to local automakers with an annual output of more than $700 million – even though the industry faces numerous problems with automakers and 170 domestic producers. This is because the Chinese government is eager to create a highly skilled automotive industry,...
China is paying more subsidies to local automakers with an annual output of more than $700 million – even if the industry faces a myriad of automakers and 170 domestic producers.

This is because the Chinese government is eager to create a highly skilled automotive industry that will compete with Germany and the United States and promote local automakers to go abroad. But this will hinder China's goal of integrating many small domestic companies, and the trade relationship will become complicated.

The United States said on Friday that the World Trade Organization (WTO) ruled that China improperly imposed tariffs on US-made luxury cars and sport utility vehicles (SUVs) with an annual output value of about $5 billion. The WTO recommended that China revise anti-dumping regulations.

Experts say that subsidies issued by the Chinese government will delay overcapacity and hinder the development of local leaders who are likely to compete in the global market. According to Janet Lewis, an analyst at Macquarie Securities, this is actually a tug-of-war between the local government and the central government, which wants the automotive industry to bring fame and high-paying manufacturing jobs. The latter wants industry consolidation. Derek Scissors, a researcher at the American Enterprise Institute in Washington, called China's subsidy program "permanent aid."


According to data provider Wind Information Co., China's 22 listed automakers received a total of RMB 4.59 billion ($736 million) in subsidies last year. This is an increase of 75% from the RMB 2.61 billion in 2011.

These subsidies come in a variety of forms, including local government orders and domestic vehicle purchase subsidies, so local and national financial support for state-owned automakers is difficult to calculate. According to the China Audit Office, the single central government spent RMB 13.8 billion in 2011 to promote the use of electric vehicles and new energy vehicles. In 2012, it invested another RMB 2.9 billion.

There is no such thing. Since 2009, the US government has also provided $5 billion in funding to fuel the development of the domestic battery industry and electric vehicles. In the same period, it also issued $8.39 billion in low-interest loans to help build factories and produce more energy-efficient cars.

In China, government subsidies for industries such as steel, glass, and photovoltaic panels have been seen as a way to promote growth, increase employment, and create national leaders. However, this part of the subsidy is mainly funded by the local government, thus increasing the financial pressure of the local government.

Economists have warned that China relies heavily on subsidies that encourage short-term growth, which in turn leads to overcapacity. According to data provided by UBS Securities, by 2015, the overcapacity of the Chinese passenger car market will reach approximately 8 million vehicles, most of which are from domestic automakers.

Foreign automakers are also increasing production capacity. Volkswagen AG plans to increase its annual production capacity from 3.3 million units to over 4 million units in China. Although the production capacity of foreign automakers in the Chinese market continues to increase, their market share here is also expanding, which is what Chinese automakers have failed to achieve. According to data released by the China Association of Automobile Manufacturers, the market share of domestic brands in the passenger vehicle market in April fell to 37.1% from 39.6% in the same period last year.

The way to subsidize Chinese cars is cash, low-interest loans, and tax rebates. The automaker’s financial report shows that subsidies are mainly used for research and development and construction of new facilities.

In addition to subsidies for producers, the Chinese authorities also provide incentives for consumers to purchase local brand cars. For example, Chongqing provides a car subsidy of up to RMB 3,000 for consumers who purchase some models produced by Chongqing Changan Automobile Co.; Changchun City buys state-owned enterprise FAW Car Co., Ltd. (FAW) Consumers of some models produced by Car Co.) offer a car subsidy of RMB 3,500 to 7,000.

One of the subsidized manufacturers is BYD Co., which produces electric cars and batteries and is backed by US investor Warren Buffett. BYD received a total of RMB 677 million from the local government and the central government, exceeding the company's profit of 533 million yuan. In the first quarter of this year, BYD received a subsidy of 98 million yuan, while the company's profits fell nearly 90% to 12 million yuan.

BYD said in a statement that the United States, Germany and Japan have also carried out similar new energy subsidies. The statement said that as production increases and technology advances, subsidies will gradually decrease and eventually disappear, which is what automakers including BYD want to see.

One company not included in the data of Wind Info is Hong Kong-listed Geely Automobile Holdings Ltd., the parent company of the listed company owns the Volvo brand in Sweden. The filing documents show that Geely Automobile received a subsidy of RMB 800 million, which is equivalent to about 30% of the company's profits.

Geely Automobile spokesman Victor Yang said that most of them are tax rebates. He said that in order to attract auto investment, some local governments have provided preferential tax conditions. Geely Automobile has production facilities in 10 cities in China, including the western city of Lanzhou and the southern city of Xiangtan.

Yang Xueliang said: "We accepted the subsidy because we contributed to the local economy. As our car sales growth, the proportion of subsidies to profits has declined." The company's financial report shows that in 2011, this ratio was 57. %.

Most of the financial reports of Chinese car companies are unclear in terms of subsidies. Many car companies do not clearly state how the money is used.

Sweeping Robot

Sweeping Robot,Robot Vacuum Cleaner,Best Robot Vacuum,Roomba Vacuum Cleaner

ChangChun E-vida Technology Co.,ltd , https://www.evidatec.com

Posted on