Foreign carmakers may face probe

31 July 2013
BEIJING: Foreign luxury carmakers have been accused of making excessive profits in China and should face regulatory investigation, according to a report on the official Xinhua news agency.

As reported by Reuters, the Xinhua article said some imported cars were twice as expensive in China than in other markets and, given the current scrutiny into the practices of foreign pharmaceutical companies and milk formula makers, suggested the issue of imported cars had become contentious.

Citing evidence from Rao Da, secretary general of the China Passenger Car Association, the report claimed imported cars in China were 30% more profitable than the global average.

Rao said foreign carmakers have chosen to set prices of luxury cars excessively high because rich Chinese wanted to "show off" their wealth and because there are no domestic luxury brands to compete with.

Xinhua further claimed a man named Qu bought an Audi Q7 in Canada for the equivalent of 460,000 yuan, or $75,000, but later saw the same model on sale in China for 1m yuan. It also said unspecified Land Rover models and the BMW X5 had similar price differences.

However, Rao Da later said he thought it unlikely the government would launch a probe as the 'profiteering' claims voiced in the article might be motivated by envious domestic carmakers.

Chinese carmakers have experienced a sustained market share slide ever since the government ended incentives and subsidies for domestic manufacturers in 2010 and following growing competition from foreign brands.

As also reported by Xinhua, domestic passenger vehicle sales fell in comparison with foreign brands between January and June and now account for just 41.2% of total passenger vehicle sales.

Industry analyst Hu Wenzhou said the problem for Chinese carmakers was that they made a priority of production hikes and the launch of new models while overlooking quality and service.

Data sourced from Reuters; additional content by Warc staff
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