Automobile Industrial Policy Updates

Brazil Acts to Boost Auto Industry
Brazilian President Dilma Rousseff, Finance Minister Guido Mantega and Trade Minister Fernando Pimentel announced an important industrial reform policy in early August to reduce rising real-to-greenback pressure on its manufacturing industry. The appreciating Real makes Brazilian manufacturers who rely on export less competitive.

Major measures of such policy include cutting tax on manufacturers and increasing governmental procurement of locally-made products. Trade Minister Fernando Pimentel says that the government will also change tax break regulations on the auto-sector involved in local technological development, adding that the Brazilian economy is threatened by predatory competition globally, “so we are obliged to protect our own.”

Besides the two-year US$16 billion industrial tax incentives, the policy also allows the governmental to budget 25% more to buy locally-made goods.

China to Subsidize New-energy Cars
The Beijing government announced new subsidies for new-energy cars in early August.

The government defines new-energy cars as pure electric vehicle (EV), fuel cell electric vehicle (FCEV), and plug-in hybrid vehicle (PHV), but not non-PHV hybrids, and will subsidize each buyer of such cars 3,000 RMB.

Many carmakers claim, however, this policy could discourage them from making non-PHV hybrids which are commonly regarded as transitional models between gas-fueled and new energy cars, and the means to reduce reliance on gasoline before new-energy technology matures.

The Beijing government doesn't consider non-PHV hybrids as new-energy cars for their saving only about 20% in gasoline relative to conventional gas-fueled cars, and because new-energy cars must run on alternative fuel as ethanol.

EU Proposes Removal of Favorable Tariffs

According to Karel De Guche, Commissioner for Trade of the European Union (EU), the EU is drafting a proposal to remove favorable tariffs offered to developing countries starting 2014, which will affect China, Russia, India and the ASEAN (Association of Southeast Asian Nations) countries.

To reduce impact on its trading partners in the ASEAN, the EU plans to sign another free trade agreement (FTA) with mostly likely Singapore to maintain close trade links with Southeast Asia. EU has been negotiating with Singapore over an FTA since last year, and has started similar talks with Malaysia and Indonesia this year.

Korea Attracts Foreign Auto-parts Investments

The FTA signed between South Korea and EU, the first signed by the EU and an Asian country, has attracted several European auto parts makers to invest to take advantage of the favorable tariffs offered under the FTA.

The FTA, which formally took effect in July this year, exempts South Korea from tariffs on traded items such as automobiles, auto parts, chemical, rubber, plastics in addition to IT products, with tariffs gradually reduced by 98% over the next five years and create an estimated 250,000 jobs in South Korea.

The EU will exempt automobiles assembled with at least 55% parts made in South Korea from tariffs.

The FTA is expected to boost bilateral trade by 100 billion euros (or around US$135 billion) and draw European auto parts makers to invest in South Korea. Italian Bosch Rexroth has signed a memorandum with the South Korean government to invest 20 million euro, with another project proposed by a Swedish auto parts maker.

Malaysia Proposes Green Economy

Malaysia announced a new “Green Economy” plan in early May this year to develop a country of low CO2 emission, with the plan to be worked on by an ad hoc advisory committee of 42 members from related fields.

The “Green Economy” is a new policy by the new Prime Minister Datuk Seri Najib Tun Razak, who plans to turn the nation into developed status by 2020, with the plan to wean Malaysia from production-focused activities to one of low emissions, high energy-efficiency, as well as good health and highly-educated people. “Technology and innovation are the keys for us to achieve these goals,” said the Prime Minister.

Already the government has removed import duty on hybrid cars, which has boosted sales of 1,604 vehicles during the first quarter compared to only 96 units in the same period last year. Meanwhile, the state-run Proton Holding Berhad plans to develop hybrids as official fleet cars.

Philippines and Taiwan Trade Favors
At the 17th Taiwan-Philippine Ministerial Economic Cooperation Meeting in Manila on July 15, Taiwan's Economics Minister Shih Yen-shiang and his Filipino counterpart Gregory Domingo signed a memorandum under which Taiwan helps the Philippines develop the electric vehicle industry in exchange for help to join the ASEAN-initiated free trade zone.

Taiwan will first work with the Electric Vehicle Association of the Philippines (eVAP) to help the Manila government replace aging Jeepney buses with EVs. To accelerate progress, the EV Promotion Office under Taiwan's Ministry of Economic Affairs will set up its first overseas service post in the Philippines, with the eVAP to send engineers to Taiwan for training.

In 2010, Taiwan-Philippines trade reached US$8.3 billion, making Taiwan the seventh largest trade partner of the Philippines, and the 15th largest vice versa.

Swedish Rebate Boosts Green Car Sales
Sweden is reportedly the most gung-ho to back the EU's green policy, to cut 20% in carbon emissions by 2020 from 1990 levels. Some 19% of greenhouse gases are from auto exhaust in Sweden, which the nation tries to reduce by encouraging less driving and cleaning such exhaust. Sweden has its work cut out for it has a fleet of relatively older, larger and hence fuel-hungry cars in Europe. Among other measures, the Swedish government is offering the popular green car rebate of SEK 10,000, introduced in 2007 to promote eco-friendly cars.

The rebate has been effective this year: May auto sales totaled 30,853 vehicles, among which 39.3% are green cars, up 23.4% from that of last year. The same applies to EV sales, which totaled only 5 vehicles during the first five months of last year but rose to 104 units this year.

Taiwan Builds EMC Test Lab
To facilitate the development of its electric vehicle (EV) industry, Taiwan is building an electronics ectromagnetic compatibility (EMC) testing lab which will start operation in 2012, supposedly to be the largest of its kind in Asia.

With ground broken on July 29, the lab will be run by the Automotive Research & Testing Center (ARTC) under the Intelligent EV Development Plan of the Ministry of Economic Affairs (MOEA). According to the ARTC, the lab will engage in large-scale electromagnetic susceptibility testing, EMI (electromagnetic interference) testing, ESD (electrostatic discharge) testing, and EMI/EMS engineering system testing.

Earlier in 2003, the ARTC also built a smaller EMC lab, while the new one aims to support the development of the EV industry.

U.S. to Raise Auto Energy-saving Standard by 100%
After several months of negotiations between government and automakers, the U.S. Federal Government said it will raise auto gas-efficiency standard by 100% by 2025: mileage per gallon of gas (MPG) will be raised 100% to 54.5 between 2017 and 2025.

However EVs and hybrids running on rooftop solar-battery and gasoline are not subject to the new standard.

The new MPG rating though is lower than the original proposed target of 56.2 MPG, which is supported by major American automakers but hesitantly accepted by Mazda and DaimlerChrysler; while Ford generally supports the new target but said more details have to be defined.

The proposed MPG rating obliges automakers to redesign automobiles and adopt lighter materials which will add to cost or cut profit margins, with the United Auto Worker union worried about layoffs by employers to cut cost.

Automakers must raise MPG ratings of passenger cars by 5% and light trucks by 3% annually between 2017 and 2021 to meet the stricter standard.