Multinational Car Manufacturers Threatened in China

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Chinese regulators have been upsetting multinational car manufacturers as they set new rules in the world’s largest market for automobiles. These challenges include new policies to address an intensifying competition from unauthorized “imitation” imports of their own vehicles from the United States.

Shanghai issued new standards in its free trade zone wherein it has legalized the sale of cars that manufacturers originally intended to sell in the US and other countries. This gives buyers the opportunity to avail of discounts by as much as 20%. This has caused a lot of stir among consumers and car dealers alike.

Concept CarExperts suggest that such move is just part of an even greater plan of Beijing to further pull down costs of goods. During the previous year, the People’s Republic saw many foreign carmakers to reduce the price of their cars, spare parts and services. This was an effect of the sustained pressure from Chinese competition regulators. In addition to this, local car dealers have also asked for financial assistance from their suppliers.

Today, the industry is threatening to see another price decrease due to factors such as the legalization of selling parallel import markets. This puts a significant amount pressure on multinational carmakers, particularly brands arising from Europe such as BMW, Mercedes, Audi and Volvo.

Tianjin, the biggest market for parallel imports in China, displays drastic price reduction of various luxury imports. Because of this, there is a rapid increase of intermediaries, who are buying cars in the US and shipping them to dealers in China. Consumers can get an AUDI Q7 sport utility vehicle for as low as Rmb660, 000 ($106,000) which is about just 80% of its original cost. Such price is way beneath the Rmb 828,000 price tag people will have to pay when they purchase such car at an authorized dealership.

Recognizing such threat, carmakers are trying to fight back by preventing dealers from America from selling cars to people who seem dubious and would likely sell the cars they bought back to China. Such effort appears to be a little long shot since people who wish to take advantage of the demand of cheaper prices seem to have the protection of the government. According to Max Warburton, an analyst at Bernstein Research, the carmakers have lost the battle on the Chinese Side. Despite this however, things still look promising over the side of the United States.