Talk of over-pricing puts automakers in hot seat in China

Talk of over-pricing puts automakers in hot seat in China

Anti-monopoly campaign may not help bring down vehicle prices in China.

Foreign automakers may be subjected to closer scrutiny over their pricing as demand for luxury vehicles remains robust in China, experts say. Prices of imported cars have been a hot topic recently following a series of investigations launched by the government over pricing by foreign companies in various sectors.

The China Automobile Dealers Association had last month indicated that it had been asked by the National Development and Reform Commission to collect information on whether foreign car makers were setting a minimum retail price for dealers in China.

Chinese customers are expecting a fall in prices following the announcement of the inquiry. However, industry experts maintain that premium prices will continue to remain unchanged, as demand continues to increase.

Luo Lei, deputy secretary-general of the association, says it plans to collect data on the prices of foreign cars and the profit margin made to ascertain whether price manipulation has taken place and whether prices in China are higher than in the home markets of the car companies.

Debate about foreign cars gathered further steam after China Central Television aired a programme that came down heavily on what it said are exorbitant prices and huge profit margins enjoyed by foreign auto brands in China.

Citing the example of a popular imported foreign car with a price tag of 1.89 million yuan (S$395 000), the programme said the profit enjoyed by the automaker on that model was about 470,000 yuan. Since dealers are not allowed to adjust the retail prices without approval of the manufacturer, it is also an instance of a price monopoly in the Chinese market, CCTV says.

Though foreign automakers faced a media blitz subsequently, they have refrained from making any comment.

Tao Jingzhou, managing partner of Dechert LLP, an international law firm, says the planned investigations are a welcome step as it shows China's "increasing attention to the laws and regulations in the global market", and the government's intention to create a level-playing field for all companies in China.

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