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The Shanghai Free Trade Zone will officially test parallel imports of cars next week. The Chinese government has publicly stated that the plan will increase competition in the industry and give consumers more choices. But sources close to the decision-making level said that this is one of the latest measures the Chinese government intends to reduce the price of imported cars. China's imported car prices are much higher than other countries.
For high-end car brands, when the government announced the new deal, it coincided with the slowdown in sales growth in the Chinese market, fierce competition among dealers and the authorities' price monopoly investigation.
A lawyer who attended a non-public seminar last year said that officials from the Chinese Ministry of Commerce and the National Development and Reform Commission clearly stated that they hope to lower the price of high-end imported cars.
"Legalizing parallel imports is one of the anti-monopoly actions the government has made to improve market order and reduce the price of imported cars," he said. The lawyer requested anonymity because he was not authorized to speak to the media.
In the e-mail proposal that Reuters saw, the China Automotive Technology and Research Center proposed to the government a legalization of parallel imports a year ago to "break the monopoly and promote competition."
According to the Shanghai consultancy Automotive Foresight, sales of high-end cars increased by more than one-fifth to 1.6 million last year, but still less than 10% of total car sales in China. Audi, BMW and Mercedes-Benz account for about 70-80% of the high-end car market.
A manager of Shanghai Waigaoqiao Auto Trading Market Co., Ltd. said that more than 20 dealers have applied to join the pilot scheme. The price of luxury cars imported through the scheme is about 10 compared with the regular sales channels. -20% discount.
Take the BMW 650i xDrive Convertible as an example. The US sales start price is $97,900, while the price in China may be close to 2 million yuan (about $320,000). This huge price difference was greatly attacked by the Chinese media. Chinese regulators imposed a total fine of US$46 million on Audi’s Chinese company and Fiat Chrysler’s Chinese sales subsidiary last year for price manipulation.
Grey market China's water truck market has existed for some time, mainly in Tianjin, and about half of China's imported car transactions are completed here. However, buyers have been more cautious because of the lack of quality assurance and after-sales service for parallel cars.
With this new plan, the situation will change.
IRIS Automotive analyst Namrita Chow said, "The main significance of this pilot program is that buyers will now be able to legally own a warranty service package, "whether their imported car is purchased from an authorized channel or an unauthorized channel.
Analysts said it is difficult to measure the likely impact on the price of the car because it is not clear which models will be classified as parallel imports.
Audi said in an e-mailed statement that its Chinese dealer network is well prepared for "competition." BMW also said that it is not expected to have a "great" impact on its China operations. Daimler, who owns Mercedes-Benz, said that it is too early to comment.
March 24, 2023