image

Motoring

Presented by

Motoring

Great Wall Motor reviews Mexico plans amid Trump’s tax threats

Chinese carmaker may now choose the US for its first North American plant to make Haval SUVs

PUBLISHED : Friday, 10 March, 2017, 8:33pm
UPDATED : Friday, 10 March, 2017, 10:45pm

China’s biggest sport-utility vehicle maker is reconsidering its plan to build a plant in Mexico that would have made its bestselling cars for the US market, joining a growing list of global carmakers reviewing investment plans after tax threats by President Donald Trump.

Great Wall Motor, led by chairman Wei Jianjun, might choose the US instead for its first North American plant, general manager Wang Fengying said.

The company had a research centre in Los Angeles and would accelerate preparations to develop US-certified versions of its Haval SUVs for sale by 2020, Wang said.

“Your decisions should always adapt to the dynamic changes,” said Wang, a delegate at this week’s National People’s Congress in Beijing. There used to be many carmakers building plants in Mexico but Trump’s changes had affected their decision-making, Wang said.

Trump has promised to renegotiate the North American Free Trade Agreement and criticised carmakers including General Motors and Toyota Motor Corp for shifting production south of the border. Under threats of punitive import duties, Ford Motor and Japanese car-parts maker Nisshinbo Holdings said they would scrap or reconsider new plants in Mexico.

Great Wall is one of several Chinese carmakers hoping to break into the US with its own brands. Guangzhou Automobile Group plans to start exporting its Trumpchi models to the US from next year, while Warren Buffett-backed BYD and Volvo Cars owner Zhejiang Geely Holding Group have also declared American ambitions.

“Building in the US is a hedge against a potential future trade barrier with Mexico,” said Bill Russo, managing director of Gao Feng Advisory and former head of Fiat Chrysler Automobiles’ Chrysler unit in China. “It would add cost to producing the vehicles but it reduces the potential tax risk.”

For more than 20 years, China has asked foreign carmakers seeking to set up manufacturing plants there to do so through joint ventures with domestic players, a move that allowed many Chinese manufacturers to gain technology and eventually set up their own brands. Local marques like Geely, Trumpchi and Haval now account for almost half the Chinese market.

The Chinese carmakers are trying to reverse the tide and sell their own models to Europe and the US, just as the Republican-led House of Representatives is considering implementing a border adjustment tax on companies’ imports but not exports.

Building in the US is a hedge against a potential future trade barrier with Mexico
Bill Russo, managing director, Gao Feng Advisory

The proposals by Trump and lawmakers would raise the average cost of a car in the US by about US$3,300 and could even cost American jobs because carmakers sourced parts from around the world, Munich-based consultant Roland Berger said on Wednesday.

The price increases would lead to about US$34.6 billion in higher costs to consumers, assuming US sales at the 17.5-million level recorded last year, the Centre for Automotive Research said in a report on Thursday.

In China, Great Wall is enjoying a sales surge as domestic drivers embrace SUVs despite government efforts to curb fuel consumption and emissions. Its domestic sales rose 26 per cent last year to 1.1 million units, putting it ahead of Japan’s Mitsubishi Motors Corp in global vehicle production. Abroad, though, it has had less success, selling only 17,379 units last year, mainly in countries such as Russia, South Africa, Bulgaria and Australia.

The company was exploring opportunities in developed markets and wanted to make the Haval brand global by 2020, Wang said. The company markets its SUVs in China as offering good value for money and prints ads with the title “See. Drive. Believe”, while overseas it also uses pictures of its vehicles driving in the off-road Dakar rally competition.

More than four of every five vehicles Great Wall sells is an SUV and the company is under pressure at home as China tries to clean up the choking air in its biggest cities. The government has proposed rules that would require carmakers to improve fuel economy and produce a higher proportion of so-called new-energy vehicles such as battery-powered cars.

Wang said Great Wall planned to invest at least 60 billion yuan (US$8.7 billion) in developing new-energy vehicles by 2025, without giving details on how the investment would be funded.

business-article-page