Luxury imports may face fewer big-ticket payoff days
Updated: 2013-08-26 11:02
By Michael Barris in New York (China Daily)
The days of big money in China for luxury foreign-car manufacturers may be at an end.
Coming after recent news reports accusing the automakers of jacking up prices and sowing discord between dealers and auto makers, China's Ministry of Commerce on Friday said it will move to change rules governing vehicle sales in the world's largest auto market.
A Ministry spokesman said the move could include limiting auto makers' power to demand a deposit from dealers, which would give local dealers more freedom over the vehicles they sell.
A Xinhua news agency editorial last month called for an investigation into automakers' pricing practices, noting that the sticker price on some imported cars in China was twice what it was overseas, singling out Volkswagen, Audi and BMW, among other companies, none of whom could be reached for comment Friday.
Foreign carmakers and their local partners control around three-quarters of the overall Chinese market. Imports - generally luxury vehicles - accounted for 5.7 percent of car sales in the country last year. China has become a key market for luxury carmakers, with 2.7 million expected to be sold each year by 2020, putting the country on track to overtake the US as the world's largest luxury-car market.
As an example of high pricing, International Business Times reported a Ferrari 458 Italia sports car selling for $724,000 in China - three times what it would cost in the US. In another case, Xinhua said an Audi Q7 was selling for $163,000 - twice as much as it would in Canada.
But sales in China are beginning to tail off amid a slowdown in China's economy and a government crackdown on so-called conspicuous consumerism. "The days of breakneck growth are over," BMW's President and Chief Executive in China, Karsten Engel, was quoted in the Wall Street Journal in June.
Imports tend to be pricier in emerging markets because of government protective tariffs aimed at promoting the purchase of locally made cars and steep taxes on luxury goods.
Two weeks ago, Luo Lei, deputy secretary general of the China Automobile Dealers Association, told China Daily the group was launching an investigation into the "unreasonable pricing and excessive profits" of some foreign car brands in China. Luo had said the probe would cover costs, profit margins and taxes. The tough stance also follows the beginning of a series of price-fixing investigations by regulators and the police on a range of foreign products and sectors, from infant formula to jewelry to pharmaceutical companies.
(China Daily USA 08/26/2013 page2)