Asian auto sector to make major gains under RCEP

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Workers weld at a workshop of an automobile manufacturing enterprise in Qingzhou City, east China's Shandong Province, June 30, 2020. Photo: Xinhua

Asia's auto industry is expected to make major gains from the signing of the Regional Comprehensive Economic Partnership (RCEP), with key auto-making countries such as Japan reaping the largest benefits in exports, experts say.

Japan and South Korea, known as primary providers of luxury cars and auto parts, are expected enter a large vehicle market like China with the benefit of reduced import tariffs, Song Jin, an independent car analyst, told the Global Times on Tuesday.

Under the RCEP, the percentage of tariff-free products traded between China and Japan will increase from 8 percent to an anticipated 86 percent, boosting Japan's exports of auto parts, media reports said. China's imports of Japanese auto parts account for the bulk of total bilateral trade at around 27 percent. Under the RCEP, almost 90 percent of auto parts shipped to China will be exempt from import tariffs.

Japan is also expected to gain major benefits from the new trade pact with South Korea, Japan's third-largest trading partner. Under the RCEP, up to 92 percent of Japan's export to South Korea will be tariff-free, compared with 19 percent currently.

The optimism over the trade pact's impact on the country's automotive sector has been reflected in the stock market. On Monday, following the signing of the trade deal on Sunday, shares of Nissan jumped more than 5 percent, while Mazda was up by 6.82 percent and Honda rose 5 percent.

However, it is not just major automotive parts suppliers such as Japan that will benefit from the RCEP. Experts noted that from a macro perspective, freer circulation of materials within the region will create a strong synergy effect, strengthening the regional supply chain.

Southeast Asian countries, for example, are expected to get a wave of new establishment in assembly plants thanks to their relatively low labor costs, Song said.

"The core technologies such as energy power batteries can quickly enter the ASEAN market, and it is also possible for China to transfer the industry chain to ASEAN and build factories at a lower cost," he said.

The signing of the treaty won't have much impact on the general structure of the auto industry in the region, but member economies are expected to benefit from a relatively closed loop, a larger shared market and lower manufacturing costs, analysts said.

Wu Shuocheng, an independent car analyst, told the Global Times on Tuesday that China's new energy vehicle industry will take the opportunity to seize a larger share of the ASEAN market with its leading technological and cost advantages. With lower tariffs, imported cars may be cheaper in both the Chinese and ASEAN markets.

"High-end luxury cars like Lexus will likely reduce selling prices in China after RCEP is implemented, benefiting Chinese consumers," he said.

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