Speculation: Russia might revoke Chinese made cars

It seems the Russians are getting very, very protectionist about their car industry, which seems to make nothing but terrible cars (except the Lada Niva). A few weeks ago we reported that Russia had ‘dropped the bomb’ on Chinese car makers, it seems the mustachioed, fur hat wearing policy makers in Moscow have gone a step further.

Chinese car makers often export cars to Russia using a CKD format (complete knock down) this means the factory in China gets all the right pieces together and ships them to a Russian factory where, the workers get the worlds hardest Airfix model to build. The Russian government originally charged a 15% tax on these CKD kits, as they are not a full car, but not individual pieces either.

The Russian government hauled Cherys partner in Russia, AVTOTOR, into court the other week charged with failure to pay an 80million USD tax bill. AVTOTOR claims the tax bill should be at 15% per CKD kit, but the Russian government now says the CKD kits are to be taxed at 25%, as the Chinese are essentially just sending ’screwdriver’ kits over the border, basically the cars just need putting together with a screwdriver.

To qualify for the lower 15% tax, Chinese manufacturers must send their cars unwelded, and without body paints, to further complicate matters Chinese manufacturers must have a license to operate a car factory (a car factory being able to spray cars, and weld them) n Russia, but of course they cant get that license.

Motoring industry sorts believe that Chinese car makers will be forced to quit the Russian market, as the cost of doing business is soaring.

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We’re hearing rumors at China Car Times central that Russian authorities are once again twisting the thumb screws down on our very own Chery and Geely auto makers.

Previously Russia effectively made it very difficult for Chinese automakers to operate in Russia over the past few months, and have been slowly forcing the Chinese out of their markets. The latest issue for Chinese makers in Russia, is the raising of the automobile standard by the Russian authorities, which is forcing Chery and Geely to leave the Russian market. The latest rules from the Russian authorities relate to the tax paid on CKD kits, and how CKD kits actually qualify as CKD kits, Russian authorities also believe the emission standards of Chinese cars are too low.

The Chinese motoring press say that Chery has already basically pulled out of Russia, Geely will do eventually and Great Wall has had nothing but problems with Russian bureaucracy.

Despite the eventual leaving of the Russian markets, Chinese manufacturers have already invested millions of dollars into the market and sold many thousands of cars in Russia. Who will loose the most from this deal, the Chinese manufacturers, or the Russian people?

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mememe said:

Why is it bad news ? They still have a monstrous Chinese market at home there.

At least, Chinese makers like Chery is not struggling like Toyota when it first ventured out of the homeland. And despite the struggle on foreign land like America and Europe at initial stage, Toyota still managed to grow into a monster like one today.

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June 23, 2008 - The Russian government will implement the revised version of its certification system for vehicle imports starting July 1, which will raise the standards for foreign carmakers to enter the Russian market and affect China's auto export to Russia.

Russia has used three means of importing vehicles: temporary import in small quantities, one-year import, and three-year import. But from July 1 when the new certification system takes effect, the temporary import will be canceled, and some of the three-year import standards will be used for the one-year import, which has additional requirements for emissions and safety. This will keep foreign carmakers, especially those from China, who are not ready for the new certification system, at bay from one of the world's emerging auto markets.

But Ford Motor will have lots of rivals driven away because it has large manufacturing facilities in Russia and is well prepared for the new system. Currently Ford has 133 sales and service centers in 88 Russian cities and it aims to sell 200,000 vehicles in the country in 2008, up 17.6% over last year.

As export of complete vehicles has become a major channel for Chinese carmakers to enter the fast-growing Russian market, and Russia has been the largest destination market for China's auto exports, the upcoming implementation of Russia's new certification system for vehicle imports will certainly put Chinese carmakers at a disadvantage.

The major problems challenging China's vehicle exports to Russia include some uncertain details in Russia's new certification system, the rising costs of delivering vehicles to Russia for certification, and the shrinking recognition of China's certification by Russia's new policy.

However, Chinese carmakers remain philosophical about the dramatic change in the Russian certification system for vehicle imports.

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martin_krpan said:

Russia's new certification to affect China's auto exports



source: Gasgoo.com

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October 20, 2008 - 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.

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kugmo said:

Wow, why is that? poor sale or poor quality? But I don't think it's the latter.

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martin_krpan said:

Geely and Chery to retire from the Russian market?



source: China Car Times

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