Chinese carmaker GAC says trade war could hurt plans to enter US market
BEIJING (Reuters) – Guangzhou Automobile Group Co. Ltd. (GAC) on Wednesday said a brewing trade war between China and the United States could hurt the Chinese automaker’s plans to break into the US market if tariff barriers are raised.
Increased US tariffs on imported Chinese vehicles would have a “significant” impact on GAC’s plans and strategy to break into the US by 2019, GAC Group president Feng Xingya told reporters at the Beijing auto show.
In a standoff over trade, the US government has said it could add a 25% tariff to some 1,300 products from China, including gasoline- and electric-powered motor vehicles. China levies a similar tariff currently on imported US cars.
“If the United States really levies a 25% tariff, it would have significant impact on us,” Feng said at Asia’s largest auto show. “We are now doing studies on our price competitiveness and profit potential [after any tariff increase].”
Chinese automakers export relatively little overseas to markets such as the US, but manufacturers such as GAC and Volvo cars-owner Geely Automobile Holdings Ltd. are increasingly looking abroad.
GAC Group and subsidiary GAC Motor presented its Trumpchi brand at the Detroit auto show last year. It subsequently considered changing the name for the American market due to its unintended similarity to the name of US President Donald Trump.
The specter of tariffs made the current climate risky for all Chinese firms seeking to do business in the US, Feng said.
“Chinese companies should exercise more caution when they enter the US market and make strategies [for any risks],” he said.
There is broad hope that China and the US can reach an agreement on trade to avert the possibility of extra tariffs. Otherwise, China is prepared to retaliate with its own list of tariffs on US goods.
Trump on Tuesday said the US would likely reach a trade agreement with China and that officials from both sides would meet for negotiations in a few days’ time.
China has also pledged to loosen rules for foreign ownership of domestic automakers, previously capped at 50%, and allow firms to have more local partners.
However, GAC’s Feng said it may not be in foreign firms’ best interests to change current arrangements.
“If the law now says you can at most marry four wives, you are not really going to do that,” he said.