A recent decision by the Chinese government to change the way it calculates the value-added tax (VAT) on finished goods will result in higher prices of as much as 8 percent on Chinese-made tires and wheels in North America, according to importers of the products.
China's government made public in early June its decision to reduce the size of VAT refunds it provides producers of goods for export. In the case of tires, the refund is being reduced to 5 percent from 13 percent and on wheels to 9 percent from 17 percent, according to Greenball Corp. in a letter to customers.
As a result, Greenball-distributor of the Towmaster, Homaster and Secura brands-will raise prices July 1 by 8 percent on direct container shipments and by the same 8 percent on warehouse shipments starting July 16, the company wrote in a June 19 letter to customers.
China Manufacturers Alliance (CMA) L.L.C., importers and marketers of the Double Coin, Bluestar, Warrior and other brands, told customers the week of June 25 to expect higher tire prices starting July 1, but at Tire Business' presstime, June 28, it had not finalized the scope of the increase.
In a letter to customers, CMA Vice President Aaron Murphy said the change ``will affect factories in a different manner as each factory has its own ratio of domestic produced raw materials vs. imported materials.''
Zisser Tire Wholesale Inc., importer and distributor of the Wanli high-performance line, will be adjusting prices upward but had not settled on the details at presstime, said Don Mathis, sales manager for the St. Louis-based firm. Zisser also is launching a second import line, Diamondback, made by Triangle Group Co. Ltd., in August. (See story on page 32.)
``It's going to happen sometime in the next 30 to 45 days,'' Mr. Mathis said. ``We're waiting to hear from our suppliers how much they're going to raise prices.''
The situation is similar at Sutong China Tire Resource Co. Inc. in Houston-distributor of the Hi-Run, Long March, Super Cargo and Super Strong brands-said Manager Nancy Zhao, adding the company is still analyzing the data to determine its price hike.
Cooper Tire & Rubber Co., which is importing millions of tires from China via its joint ventures there, said it is aware of the situation but as of June 28 had made no decision regarding price adjustments.
Several companies said there likely will be a second wave of price increases several months down the road when non-Chinese makers that source raw materials in China have to account for the changes they will start experiencing in July and August.