China to probe foreign automakers

0 Comment(s)Print E-mail China Daily, August 15, 2013
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The China Automobile Dealers Association is beginning an investigation into the pricing of foreign car brands in China.

"We are collecting data to investigate the price structure of imported vehicles in a bid to find out what is behind the unreasonable pricing and excessive profits of some brands," said Luo Lei, deputy secretary-general of the association.

Luo said the probe will cover costs, profit margins and taxes.

He told China Daily that the probe is a routine one that "the association does every year", and does not suggest any government effort to deal with price fixing.

He called some foreign media reports to this effect a misunderstanding.

The probe comes after some foreign milk powder, jewelry and pharmaceutical companies were investigated for alleged price fixing.

Reuters reported on Tuesday that the National Development and Reform Commission had asked the association to investigate car makers setting minimum retail prices for dealers in China, which lawyers said contravenes the country's Anti-Monopoly Law.

"The probe does not mean that the Chinese government is targeting the automobile industry (for price-fixing), especially for foreign automakers," said Luo. "The information collection covers the whole industry, including foreign brands, joint venture brands and China's domestic brands."

He admitted that the prices of some foreign vehicles are much higher in China than in other countries, especially in the luxury car segment.

Foreign auto manufacturers, including Mercedes-Benz, BMW and Audi, declined to comment on Wednesday.

China has been the major profit engine for many foreign automakers, especially as they are suffering market saturation and economic slowdowns in their home countries.

However, "the high prices of foreign-brand vehicles, especially imported vehicles, have drawn a lot of attention in recent years, as prices of some are two and a half times what they are in the United States and Europe," said Jia Xinguang, an independent auto analyst in Beijing.

"It's no surprise that expensive foreign vehicles have become a hot topic, especially after the government has conducted antitrust reviews into the dairy industry, pharmaceutical firms and gold trading companies."

Earlier this month, the NDRC levied its biggest fine - nearly 670 million yuan ($108 million) - on six milk powder companies accused of price fixing and anti-competitive practices.

It is also investigating some 60 foreign and local pharmaceutical firms for fixing prices.

Jia said the automobile industry's pricing system should be regulated, though it's hard to tell what specific measures the government will take in the near future. "The automobile industry is much more complicated than the milk powder sector, and involves too many government departments," said Jia.

According to an earlier report in The Wall Street Journal, listed prices of luxury cars in China are on average 64 percent more expensive than similar vehicles sold in the US, based on a comparison of three models: the Mercedes-Benz C-Class, Audi A4 and the BMW 3-Series.

The gap is even bigger when it comes to imported models, the report said.

Even after stripping out consumption taxes and value-added taxes, those three vehicles are still on average 37 percent pricier in China.

As China is not likely to adjust its vehicle tariffs, Jia suggested the government take actions to limit the big price difference between imported cars and their overseas versions.

"They should seriously monitor and control the pricing system in the automobile industry, not only to safeguard consumers' interests, but also provide a fair playing field for the struggling domestic automakers," said Jia.

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