BEIJING: China is taking aim again at foreign luxury carmakers such as Audi, BMW and Mercedes-Benz by allowing unauthorized dealers ('parallel imports') to sell cars - a move to rein in high-end car prices.
Beijing’s pilot scheme will come into effect next week in Shanghai's free trade zone to promote competition and provide consumers more choice.
But people close to policymakers say it's the latest in a series of measures aimed at bringing down prices that are far higher in China than elsewhere.
For luxury car brands, the move follows a weakening sales growth in the world's largest market, tensions with dealers, and a recent price fixing probe.
A lawyer who attended a closed-door seminar last year said officials at the Ministry of Commerce and the National Development and Reform Commission, China's top economic planner, made it clear that their intention was to cut the price of high-end imported cars.
"Legalizing parallel imports is part of a broad anti-monopoly campaign by the government to improve market order and bring down prices of imported cars," said the anonymous lawyer.
In an emailed proposal reviewed by Reuters, the China Automotive Technology and Research Center (CATARC), a government-affiliated think-tank, lobbied Beijing a year ago to legalize parallel imports "to break monopoly and promote competition."
Sales of premium cars rose by more than 20% last year to around 1.6 million vehicles, according to consultancy Automotive Foresight (Shanghai) Co Ltd, but still account for less than 10% of China's total car sales.
The trio of Audi, BMW and Mercedes have a collective market share in the premium segment of roughly 70-80%.
More than 20 dealers have applied to join the pilot scheme, where imported luxury models will be sold at a 10-20% discount to those available through authorized channels, said an official at the Shanghai Waigaiqiao Automobile Exchange Market Co Ltd, the market organizer.
A BMW 650i xDrive Convertible that sells from $97,900 (RM330,000) in the United States, can cost close to 2 million yuan (RM1mil) in China.
That scale of price differential has come under fire from Chinese media, and regulators last year fined a Chinese venture of Audi and the local sales unit of Fiat's Chrysler a combined $46 million (RM150mil) for price fixing.
China has had a grey market in auto sales for some time, around the northern port city of Tianjin where almost half of China's total car import deals are done.
However, buyers have been cautious given the lack of quality guarantee and after-sales service on unauthorized cars, but will change under the new scheme.
"The main significance (of the pilot scheme) is that buyers will now be legally entitled to warranty packages," whether their imported car comes through an authorized or unauthorized channel, said IHS Automotive analyst Namrita Chow.
Analysts said it was difficult to gauge the likely impact on car prices given a lack of clarity over which models come under the parallel import scheme.
In an emailed statement, Audi said its dealer network in China was "very well prepared for competition," while BMW said it doesn't expect any "substantial" impact on its China business.
Daimler, which owns Mercedes-Benz, said it was too early to comment.