Parallel-import program expansion expected to rev up foreign car sales

Plan to give Chinese consumers more choice, further opens up nation's automotive industry

China is planning to scale up its pilot parallel-import program in free trade zones, as part of the country's efforts to offer customers more choices and open its automotive industry wider to the world.

In a document released in late November, the State Council, China's cabinet, said that every qualified free trade zone in the country should be allowed to pilot the parallel-import program.

The free trade zones, which now total 12 in China, are encouraged to offer bonded storage for such imports, as well.

The program, unlike traditional car importing, does not require auto dealers to import strictly from car makers, and more often than not, the vehicles involved will be new to the Chinese market, offering more choices to potential customers.

The program, which started in the Shanghai free trade zone in 2015 and has since expanded to some other free trade zones, is a key measure of ongoing supply-side reform in the automotive industry, said Chen Zhenchong, an official from the General Administration of Customs.

He said it also helps facilitate car sales in China and increase the number of imports. In the first three quarters of this year, there were 95,871 vehicles brought to China under the parallel-import program, up 5.9 percent from the previous year, according to statistics from the General Administration of Customs.

Despite that still relatively small number, the program is helping to prompt authorized dealers to cut the prices of their imported models, benefiting potential customers.

"Our survey shows the plan has an obvious effect on the market. Since its introduction, the prices of medium- and high-end vehicles have fallen sharply, ranging from 15 percent to 30 percent," Chen said.

To further facilitate the program, the General Administration of Customs has announced plans to scrap time limits on parallel-import vehicles' bonded storage in free trade zones.

The move will allow importers to have a more flexible sales plan, without worrying about paying taxes on the vehicles before they are sold.

Traditionally, the taxes on such cars are collected within three months - whether or not the vehicles are sold during that time.

Local authorities and car dealers have shown great enthusiasm for the parallel-import plan.

In November, four new companies in Hainan province won the green light from the Ministry of Commerce to conduct parallel-import business in the province's free trade zone.

Local authorities say they expect the four companies to import 200 vehicles to Hainan through the program by the end of this year.

The provincial government has set a target to bring in 10,000 parallel-import cars by 2020, with their total sales volume expected to reach 7 billion yuan ($1.01 billion).

Henan province, meanwhile, is moving toward its goal of becoming a major base of parallel-import vehicles by 2020, now that its free trade zone has been authorized by the General Administration of Customs to offer bonded storage service for car importers.

Local customs officials say the service, coupled with the railway connecting Zhengzhou, capital of the province, and Europe, will prove advantages for the province to build a large auto trade market, which will attract customers from regions in and around Henan.

And authorities in Shenzhen, Guangdong province, are coming up with a raft of measures to stimulate the business.

In a guideline released in November, they are planning to more than double the number of parking lots reserved for parallel-import vehicles to 1,500 at the Dachan Bay port.

Importers are entitled to subsidies for such vehicles, and the time required for customs clearance is expected to be slashed by a third.

The authorities also encourage banks to work closely with car importers to offer them better financial support, according to the guideline.