China’s Crackdown on Foreign Companies Widens: Car Manufacturers to be Punished

China’s Crackdown on Foreign Companies Widens: Car Manufacturers to be Punished
Aug 19, 2014 Translated by eChinacities.com

Editor’s note: China’s attack on Apple over the last few years has been well documented, and this year’s apparent banning of Microsoft’s Windows 8 at government agencies has further fuelled speculation about the government’s motives and whether the punishing of successful, foreign companies was part of a move to give Chinese companies an advantage in their home market. However, China’s focus on foreign companies is not limited to software and technology: a new anti-monopoly probe launched earlier in the year has cast its focus on the automobile market, particularly luxury foreign car manufacturers. This translated article sheds light on the current situation.

As well as  blocked Google IP addresses, revelations about privacy breaches with Apple, investigating the “monopoly” of Microsoft, and the removal of “Symantec and Kaspersky” from its list of security software suppliers, China has begun to initiate a new wave of attacks, this time on the luxury car industry. According to an August 5 report on cnr.cn, the National Development and Reform Commission will punish Chrysler and Audi for “monopolistic behavior”; whether Mercedes is also under attack remains to be confirmed.

China’s car industry has welcomed an unprecedented price consolidation storm, with numerous car manufacturers adjusting the prices of their finished vehicles and parts under the pressure of a new “anti-monopoly” probe. At present, Mercedes, Chrysler, Audi, Jaguar Land Rover and others have already lowered the prices of their parts and have responded to the NDRC’s anti-monopoly investigation. However, BMW has yet to react.

What’s more, the Shanghai Municipal Development and Reform Commission and Hubei Province Price Bureau’s investigation into Chrysler and Audi is coming to an end. Both companies have been found to display clear signs of monopolistic practices. For example, Audi’s 4S stores in Hubei Province have unified prices for spare parts and maintenance. And in Shanghai, Chrysler has displayed similar problems. These two companies will face fines in the near future. Last week, the Jiangsu Province Price Bureau allegedly began investigating Mercedes retailers in five cities including Suzhou, Wuxi and Danyang.

Foreign car manufacturers respond to the probe

According to an official announcement by Volkswagen, from August 1 onwards, they will begin to adjust the price of domestic manufactured spare parts and “the difference in retail price between spare parts and whole cars” will be reduced; this does not include imported car models. To take the China-made A6L Audi as an example, this model’s ratio between “parts and whole” has dropped from 411% to 291%. Consumers’ usage and maintenance expenses will be lowered.

In May, Chrysler also announced a price adjustment in a number of its by-products and spare parts.  The warranty price of 145 types of high-value parts will be lowered by 20%, while the flagship Jeep Grand Cherokee SRT8 will be lowered by 65,000 RMB (1 RMB is approximately 0.16 USD) and the Jeep Cherokee 5.7L version by 45,000 RMB.

In May, the Mercedes-Benz retail company officially announced that in reaction to the anti-monopoly investigation, the company will be lowering the price of parts worth 10,000 RMB and over from September 1 onwards, totaling an average price reduction of 15%. Even though the price margin is decreasing, some industry insiders believe that there is still room to drop the prices further. Jaguar Land Rover China will adjust the manufacturer's suggested retail price of the Land Rover Range Rover 5.0L V8 engine version as well as the Jaguar F-Type convertible, with an average price reduction of 200,000 RMB. The lowest price of the Jaguar F-Type convertible will drop to around 500,000 RMB and the lowest price of the Land Rover Range Rover will decrease from 1.98 million to 1.78 million RMB.

The monopolistic behavior of imported car manufacturers is judged by the following criteria: automakers have too much leverage over car dealers and auto part suppliers, enabling them to control prices. This time the focus of the anti-monopoly investigation has been on spare parts and maintenance fees at 4S stores as well as on the supply channels of spare parts in the after-sales market. Another issue is the fact that luxury cars in China cost, on average, 2.5 to three times more than in the US. The aim of this anti-monopoly probe is to eliminate the "horizontal and vertical restraints as well as the abuse of market dominance and other alleged monopolistic behavior."

Source: china.dwnews.com

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Keywords: China anti monopoly car manufacturers Anti Monopoly Crack down China

11 Comments

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1

Guest388182
comment|65548|43131

"National Development and Reform Commission will punish Chrysler and Audi for “monopolistic behavior,”which is reserved for Chinese companies

Oct 15, 2015 06:47 Report Abuse

2

donnie3857
comment|49845|91621

An interesting note here: Foreign companies started becoming managed by Chinese managers rather than managers from the home countries. By the year 2010 most foreign companies had Chinese CEO/CFOs. this is when all the corruption and price fixing started. Now they are being caught. We get this all the time in Canada with the white guys. Telus/Bell/Rogers fix the prices on Telecommunications. Power companies in the cities have a monopoly on the power grids. AirCanada/Westjet fix the fairs on air travel. So what is happening in China is not a new thing.

Aug 20, 2014 02:27 Report Abuse

3

rasklnik
comment|49824|61824

Ah yes...evil America with our closing our market to German, Japanese and Korean cars...not like you've ever seen a BMW, Honda, or Kia on the streets of Rich, Anti-World Trade America...

Aug 19, 2014 16:07 Report Abuse

4

Redguard
comment|49814|299509

HAHAHa A long time before you bullied China. Now China bullies you! Your countries are very poor now. We are rich so you let is do these things because you need the money. Let me tell you the future. In 25 years China will be more richer and your countries more poorer. Lots of Chinese men will visit your countries and sleep with your daughters. We will get paid a lot more than the average wage to teach Chinese and we will be able to do what we want. China will have mail order brides from USA and Europe haha. I will buy some mistresses myself. haha

Aug 19, 2014 13:20 Report Abuse

5

expatlife26
comment|49817|262996

I'm not sure I believe in you, too much of a strawman.

Aug 19, 2014 13:30 Report Abuse

6

rasklnik
comment|49813|61824

Does China even know what a monopoly is? They have SOE's for Christ's sake. Unless the car makers are price fixing with EACH other, you can charge anything you want for a car, because you just BUY THE OTHER CHEAPER BRAND...

Aug 19, 2014 13:00 Report Abuse

7

Burak43
comment|49809|291253

I know I repeat myself, but seriously, somebody should take these Chinese assholes to the WTO court. Other thoughts: 1. Land Rover has monopoly on Land Rover products?????? 2. Shit's expensive in China not because of taxes, increased market uncertainty and higher willingness to pay, but because evil foreigners are price gouging poor Chinese who just want to save 200.000RMB on a 2.000.000 RMB car. :( :( :( 3. With arbitrary rules scaring off foreign companies and little to no innovation to speak of, what is the plan exactly for transforming China into a high-income economy?

Aug 19, 2014 11:03 Report Abuse

8

sharkies
comment|49805|38436

Couldn't agree more! The world should say F&@$ you back! Imagine if all foreign companies pulled out of China, or all foreign universities stopped accepting Chinese students. China would be well and truly up shit creek. China gets away with too much, it's time for foreign companies to stand up and make a move.

Aug 19, 2014 09:37 Report Abuse

9

RobertZimmerman
comment|49844|292371

Not sure that I agree that the ship is going down so to speak but this certainly is a part of a wider anti-foreigner stance. The CCP has abandoned Marxism creating an ideological vacuum the CCP is pushing Chinese nationalism in a number of different areas.

Aug 19, 2014 23:11 Report Abuse

10

qadirjadoon
comment|49969|95545

actually china does make some pretty high quality stuff aswell..but most or all of it is exported, and restamped as made in europe or usa etc. And they let the leftover rejected stocks in the local market.. which is ofcourse of not very good quality. Secondly the Chinese government talks alot but in reality doesnt give a shit about its people, however the thing they do give a shit about is no one leaves the governments "cut". that is the reason why the china showed to chinese people and the rest of the world consists of 12 cities including shanghai beijing guangzhuo and shenzhen...however this is not china, there are people working for 200rmb a "month" in the interior with no social or health benefits. The thing is China is just being a bitch about everything now, disrespecting companies and foreigners, the one thing China is forgetting that if it wasnt for the foreigners coming here to set up companies for cheap labor, they would still be riding a bicycle to work and thinking of owning even a watch let alone the bentleys. like north korea. 80% of china is useless, with only 2 big rivers in a country of this size even the irrigation land is far less to feed itself for an year plus the quality of soil is even worse. the sea waters are dirty for proper range of marine life. almost every production is a copy of someone else's idea, i have worked in chinese companies, some one found kick starter and now the board meetings are about kick starter ideas, and how to copy it before the original inventor does. Chinese cuisine is the biggest in the world, because people were hungry for thousands of years, so they eat everything...insects to animals...even the vegetables, the stuff that even goats dont eat humans eat...centipede, worms and reptiles are survival food, not luxury food...pork is a poor mans beef...easy to keep, cheap to raise..but here it has high sentimental value..China is also the only country where cannibalism is legal, they women who give birth eat the placenta in a soup for beauty..( placenta- be it urs or someone else- is human tissue thus consumption of human tissue is cannibalism) . im not trying to degrade anyone..or any culture...i highly appreciate it, but if tomorrow i become a billionaire and start acting as an asshole, forget my roots and what i was before then i am an asshole... This way china has already started loosing its investments, large companies are already moving out to south america and further in asia. I apologize for my comment to those who find it uncomfortable, but the point was that stop fucking with the hands that put food in ur plate after ur full.

Aug 22, 2014 03:10 Report Abuse

11

qadirjadoon
comment|49970|95545

actually the ship is going down... there is a basic law in practical economics- the faster you go up, the harder you come down. china has not been a marathon runner like the US or EU...its been a sprinter... and sprinters tire faster...the housing prices are going up...but this bubble will burst...china is moving towards africa buying irrigation land and oil resources to over come the fall that is due in the next 5 years...chinese wealthy people will loose their money...but the government will not....now the government is talking to canada and usa to send the chinese business men who moved their assets offshore...they saw whats happening..and when all of these 122 individuals are out..the country is screwed big time...so they trying to get them back...and their wealth in the mainland...usa is the land of the free, if u work hard and pay ur taxes...u can say fuck u obama its my money and land....here its not like that....the government owns everything...the banking system, the transportation, telecommunications everything...and guess what service sucks....why the hell i need 500 stamps and 200 documents to change $50 into rmb...or 5 working days to make a demand draft on cash....or bloody pay incoming calls...or cannot customize my car??....cuz they dont want u to have a brain...the world knows chinese people from cantonese people...people who ran from fujian and other places..they worked hard....not the rest of the shanghainese freeloaders being proud of themselves for picking up where the real men made the country with their sweat and blood...China has problems with japan, but its not even half as balsy as japan...those guys made themselves frm scratch, and on their own ideas...developed technologies far advanced than the rest of the world...and yet u still find culture, discipline and tradition in every home.. east nanjing road is not china, go 3 streets behind it in the shady areas then ull see china....

Aug 22, 2014 03:31 Report Abuse