Chinese anti-monopoly investigation on automotive industry continuing

The National Development and Reform Commission's anti-monopoly investigation continues to make waves in the automobile industry. The NDRC has already fined 12 Japanese manufacturers a total of 1.24 billion RMB ($201.27m); 831.96 million RMB ($135.04m) in fines were directed at eight automotive part manufacturers and the remaining 403.44 million RMB ($65.49m) was targeted at four Japanese axle bearing manufacturers, including NHK.

Earlier this month, the Jiangsu Price Bureau announced that it had already obtained relevent evidence in its investigation of Mercedes-Benz showing that the manufacturer has engaged in price monopoly practices for its automotive parts and after sales services. Prior to this, Audi had already admitted to engaging in monopolistic behavior and announced that it is willing to accept any legal penalties.

The Hubei Province Price Bureau has also conducted an investigation of four BMW 4S dealerships in Wuhan. During the investigation, the Bureau came to the conclusion that the dealerships had engaged in monopolistic price fixing; they have been fined 1.63 million RMB ($264,044) in cash. The penalties have surely gained the attention of several other 4S dealerships in the country.

A representative from a luxury automobile 4S dealership in Sichuan explained the plight of dealerships, stating that dealerships are merely following the provisions stated in the Automobile Brand Sales Management Measures. The representative advocated that automobile manufacturers should be the main target of the investigations. The representative explained in detail: "Currently, dealerships are having a very hard time conducting business. New car sales generally don't bring in any profits, [so dealerships] have to rely on after sales services."

An industry analyst added that the existing legislation favors manufacturers over dealerships. Manufacturers rarely look out for the livelihood of dealerships after selling vehicles to them. The analyst added that the legislation may lead to decreasing prices for automobiles, automotive parts and after sales services, at the same time boosting sales.

China Association of Automobile Manufacturers Deputy Managing Director and Deputy Secretary General Dong Yang explained his prospects for the automobile market following the policies: "Having manufacturers reduce prices is of course good news, as the prices for imported and luxury automobiles are very high. At my time at BAIC, dealerships would be willing to sell imported Mercedes-Benz vehicles, but were not fond of selling Beijing Benz vehicles. Why you ask? Because imported vehicles were very profitable."

However, Mr. Dong made sure to emphasize that the luxury automobile segment is separate from the rest of the market. As such, the result of the policies on the overall automobile market will be somewhat limited.