Since the 22nd, the European Union has taken countermeasures against the US steel and aluminum tariffs. On the same day, US President Trump further threatened on Twitter to impose a 20% tariff on EU imports. Once the United States does impose tariffs on European automobiles exported to the United States, it will have a profound impact on the pattern of China's automobile market.
Before the European Union took countermeasures against the United States, China retaliated against the United States because the United States perfidiously imposed high tariffs on 50 billion yuan of Chinese exports to the United States, including a 25% tariff on U.S. cars, which will take effect on July 6. According to China's strategy of further opening up to the outside world, from July 1, China will significantly reduce tariffs on imported cars. In other words, cars made in the United States were subject to higher tariffs after only a few days of lower tariffs. At the heart of all this is to make the U.S. auto industry feel pain, and then let them convey the pain to the U.S. government, and affect the election of the U.S. midterm elections, and thus affect U.S. policy. In view of the "automotive political economy" international and domestic laws of peers, since Trump fired the first shot of the trade war against China, the good days of US car companies in China should be over, and when to resume depends on the final direction of Sino-US relations.
As we all know, China and the United States are the two largest and most open auto markets in the world, and if Trump decides to impose a 20% tariff on EU cars exported to the United States, it will undoubtedly bring a huge blow to the European auto industry. In order to regain the losses in the United States, European car companies must exert efforts in China, riding on the express train of China's tax reduction on imported cars, rapidly expanding their market share in the Chinese market, more precisely, squeezing the share of American car companies in the Chinese market. Especially Mercedes-Benz and BMW, if they can't see the improvement of China's policy toward the United States and the date when the US penalty for EU cars will be lifted, then they will consider taking products made in the United States to China for production. At that time, American car companies, whether in China or In Europe, will be airborne, of course, this treatment is all given by Mr. Trump.
In fact, the basic strategy of American cars in China is very clear, that is, to produce low-end cars in China in order to maximize the scale; the high-end market is occupied by importing original cars, and thus boosting the brand status. The reason why the most high-end cars have not been produced in China is that in addition to the consideration of brand status, there are also some economic factors. First, some core technologies are reluctant to come to China to maintain a dominant position in China's automobile industry; second, the sales of top cars in the Chinese market are not large, and production in China cannot reach economic batches; third, production in China may soon be able to reach economic batches, but this will reduce employment in the country, which will inevitably be opposed by labor unions, and is not in line with Trump's emphasis on American manufacturing. However, if high-end cars are subjected to high tariffs by China, and the United States imposes punitive tariffs on EU cars exported to the United States, then the US market will become an island, in stark contrast to the open Chinese market. Then, the global strategic concepts of multinational companies, including US car companies, will be adjusted accordingly because Trump launched a trade war against the world, and the changes in the Chinese market pattern are part of this change in the concept.
At present, Volkswagen has built and is building a production capacity of about 6 million units in China, and Volkswagen, which has suffered setbacks in the US market, will make full efforts to expand its share in the Chinese market. In the meantime, the China-Japan-South Korea Free Trade Zone is in full swing, and Japanese car companies that were suppressed many years ago will take advantage of the improvement of state-to-state relations to launch a major counterattack and regain the market share lost that year. At the same time, the Chinese market is being driven by the rapid development of the technological revolution, on the one hand, the German system is in the turbo + direct injection + dual clutch transmission is in the leading technology, and occupies a clear market advantage; while Toyota began to challenge the German system from the high compression ratio engine + new CVT technology route, trying to regain the throne of the global sales champion; on the other hand, under the impetus of the interconnection, intelligence and electrification of the car, the Chinese automotive market is undergoing profound changes. At the same time, major groups have introduced modular strategies, especially Toyota's actions. In the meantime, the American car seems to be a spectator role. Coupled with the white eyes of the Chinese government, under the attack of various people from multiple dimensions such as technology and market, it is believed that the market position of American cars in China will decline rapidly. Obviously, the change in the status of American cars in China is closely related to Mr. Trump's economic policies.
As we all know, it is not the Chinese that has promoted the change in the strategic pattern of Germany, the United States, Japan and South Korea in China, but the current president of the United States, Mr. Donald Trump, which can be said to be a new case of "automotive political economy". Given the impact of Trump's economic policies on the global auto industry and the uncertainty surrounding future developments, we have chosen him as the newsmaker of the week for this issue. While we do not believe the U.S. will increase tariffs on another $200 billion of Chinese exports to the United States, we will continue to monitor the future direction of Trump's economic policies and the impact on the auto industry.