Russia's higher KD-parts tariff to hit China carmakers

Shanghai, October 20 (Gasgoo.com) The door for Chinese carmakers to export their vehicles to Russia is getting narrower. Shanghai Securities News reported on Sunday that the Russian government will start implementing a new policy on November 14 to levy a 15% tariff on auto-making knock-down (KD) parts as an imported vehicle body.

As many automakers in China export their products in the form of knock-down parts to Russia, this new policy will deal a heavy blow to the Chinese car companies. This tariff policy will be carried out for a nine-month trial period. At the 15% rate, up to 5,000 euros ($6,700) has to be paid as tariff on an imported car body.

An industry insider told the Chinese newspaper that this decision by the Russian government is targeted at some Chinese companies who have cashed in on the loopholes in Russian policies (such as tax-free special zones) and make unfairly huge profits in assembling the knock-down parts. The new policy will greatly increase the costs of assembling KD kits in Russia.

This is the second time this year that Russia has issued an import policy unfavorable to Chinese companies. In July, Russia implemented its revised imported auto certification system, increasing the check items of China-made auto imports to 55 from 15 and the certification validity period from one year to six months.

This year to date, the Russia sales of most Chinese automakers have dropped sharply. In the first eight months, there were nearly 1.92 million vehicles sold in Russia, up 28.2% year on year, but the sales of Chinese cars fall at a two-digit percentage. In the eight-month period, China's FAW Group only exported 1,405 vehicles to Russia, down 10%.

However, by exporting finished vehicles rather than KD parts for assembling to the Russian market, some Chinese automakers, such as Great Wall Motor and Geely Auto, can manage to meet the challenge posed by Russia's new tariff policy and fulfill their sales targets in this growing market.