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China should consider raising temporary tariff rate on imported cars with engines larger than 2.5 liters: expert2024/5/22 9:20:17(Beijing Time) Lange Steel

China's auto industry has seen rapid development in recent years, with the electric vehicle (EV) sector in particular gaining global prominence. This is in line with China's green development concept, as well as the global effort to cut carbon dioxide emissions to tackle climate change. However, China's EV industry has also become a target for a US' crackdown campaign against China. The EU has also launched a so-called anti-subsidy investigation into Chinese EVs.

To further accelerate the green transition in China's auto industry, Liu Bin, chief expert of China Automotive Technology & Research Center and deputy director of China Automotive Strategy and Policy Research Center, who has participated in drafting policies for China's auto industry, has called for raising the temporary tariff rate on imported cars with large engines. In an interview with the Global Times (GT), Liu also noted that according to WTO rules, China's temporary tariff rate on imported vehicles could be raised to a maximum of 25 percent, and any decision for China to hike the rate is in line with WTO rules, and is fundamentally different from the protectionist moves made by certain countries and regions.

GT: The COP 28 held in December 2023 called for measures and means to accelerate emission reductions in the transportation sector, including the deployment of zero-emission, low-emission vehicles, etc. Could you please explain why the green and low-carbon development of the auto industry is so important?

Liu: Green development conforms to nature and promotes the harmonious coexistence of man and nature. It is also the pursuit and yearning for a better life by people all over the world. It has now become an important driving force for world economic growth and sustainable development.

Transportation is a key area of fossil energy consumption and greenhouse gas emissions. According to data released by the International Energy Agency (IEA), global transportation carbon emissions exceeded 8.4 billion tons in 2022, accounting for approximately 23 percent of total global carbon emissions. The low-carbon development of the automobile industry is an important starting point for the global transportation industry to promote carbon emission reduction.

In China, carbon emissions from the transportation industry account for 9 percent of total carbon emissions, of which road transportation accounts for 80 percent of total carbon emissions in China's transportation industry. Therefore, the green development of the automobile industry has received significant attention from governments around the world.

The auto industry's path toward green development is an important part and a solid measure to comply with the concept of green development, respond to climate change and achieve the goal of net-zero emissions in the transportation industry.

GT: What specific practices has China's auto industry taken in implementing the concept of green development?

Liu: China's auto industry is actively promoting the implementation of the "dual carbon" goals. Measures include launching the New Energy Vehicle Industry Development Plan (2021-35), promoting the use of new-energy vehicles, improving the charging infrastructure, implementing comprehensive electrification pilots for public vehicles, promoting the construction of five major fuel cell demonstration city clusters, and strengthening the integration and interaction of new-energy vehicles and power grids.

In addition, various technical standard upgrades such as vehicle fuel consumption, emissions, fuel consumption and new-energy vehicle credit-based system (dual credit system) are also carried out to further promote the development of fossil-fuel vehicle's emission reduction. Auto companies are also actively promoting the decarbonization of upstream supply chains and accelerating the comprehensive low-carbon transformation process. China's automobile industry chain is fully implementing green development and dual-carbon strategies.

GT: What results has China's auto industry achieved in energy conservation and emissions reduction? What challenges still remain?

Liu: With the iteration of energy-saving technologies and the popularization of new-energy vehicles, China's auto industry structure has been continuously optimized and it is moving toward energy conservation, electrification, and low carbonization.

In 2023, China's new-energy vehicle sector continued to grow rapidly, with its market penetration rate reaching 31. 6 percent. As of the end of 2023, the number of new-energy vehicles in China has reached 20.41 million units. The China Automotive Technology & Research Center estimates that it can reduce gasoline use by more than 10 million tons and reduce CO? emissions by more than 30 million tons per year.

Meanwhile, China's domestic fossil-fuel vehicle market also shows an obvious trend toward low-emission and low-carbon, while imported vehicles with large engines account for 80 percent of China's consumption of vehicles with large engines.

Data from China's General Administration of Customs showed that China imported 250,000 cars with engines larger than 2.5 liters in 2023, accounting for 32 percent of total imported cars. According to the report of 2023 Energy Saving and New Energy Vehicle Development, average fuel consumption of all fossil-fuel passenger cars (including imported passenger cars) in China in 2022 reached 6. 73L/100 km, comparing with the average fuel consumption of imported fuel passenger cars of 8. 19L/100km. Therefore, it is necessary to reduce the import of passenger cars with large-displacement engines to further promote energy conservation, emissions reduction and green development.

GT: What policy suggestions do you have to promote green consumption and reduce the import of autos with large-displacement engines?

Liu: We suggest that based on the actual situation of China's auto consumption and WTO rules, China should promote green and low-carbon car consumption through short-term and long-term measures. In the short term, we suggest raising the temporary tariff rate on imported gasoline sedans and sport utility vehicles that have engines larger than 2.5 liters, so as to reduce imports and guide consumption expectations.

In the long term, we should implement the "New Energy Vehicle Industry Development Plan (2021-35)" in conjunction with the development stage of China's new-energy vehicle industry, and continue to optimize relevant measures to guide green development. At the same time, we can also learn from international practices and adopt various measures in areas such as fiscal, taxation, and standards.

GT: Will raising temporary tariff rate be considered an unreasonable trade restriction measure?

Liu: According to WTO rules, China's temporary tariff rate on imported vehicles could be raised to a maximum of 25 percent. The tariff rate adjustment for imported gasoline sedans and sport utility vehicles with engines larger than 2.5 liters is not only in line with WTO rules, but also conducive to optimizing resource allocation, balancing domestic and international markets, while also strengthening the policy orientation toward green and low-carbon development.

We also noticed that certain countries and regions have taken restrictive measures in the new-energy vehicle sector, which run counter to the green development concept and violate market economy principles and WTO rules. Such measures will only hurt the interests of their own consumers and undermine global efforts to promote the green transition and tackle climate change.

The measures we recommend show China's determination to implement its "dual carbon" goals and accelerate green development, which is fundamentally different from the protectionist measures of certain countries and regions.

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