FTZ starts par­al­lel im­port of cars

China Daily (Canada) - - FRONT PAGE - By LI YANG in Shang­hai

China gave Shang­hai’s Pi­lot Free Trade Zone (FTZ) the green light last week to start the so-called par­al­lel im­port­ing of cars for the first time, which could save con­sumers money.

Start­ing on Jan 7, qual­ifi auto deal­ers regis­tered in the zone could pur­chase cars di­rectly from their for­eign pro­duc­tion base. The price of such au­to­mo­biles is about 15 per­cent to 20 per­cent lower than if the pur­chase had been made through a brand’s dis­tri­bu­tion net­work.

An­a­lysts es­ti­mate the num­ber of an­nual par­al­lel-im­port cars will stay at about 10 per­cent of the over­all num­ber of im­ported au­to­mo­biles sold in China each year.

Par­al­lel im­port­ing will mainly cater to the spe­cial needs of a small group of con­sumers. An­a­lysts say the move could weaken car­mak­ers’ con­trol over prices although for­eign lux­ury car­mak­ers, in­clud­ing Daim­ler, BMW and Audi AG, have pre­vi­ously said the prac­tice would have lit­tle im­pact on their busi­nesses in China.

Open­ing up the niche mar­ket will bet­ter meet the de­mands of China’s in­creas­ingly di­ver­si­fied auto mar­ket, and, to some ex­tent, bring down the con­tro­ver­sial ex­or­bi­tant high prices of im­ported cars in China through com­pe­ti­tion.

In the 1990s, the UK ef­fec­tively low­ered the price of im­ported cars sold by au­tho­rized deal­ers at home through par­al­lel im­ports.

Weak after-sales ser­vice has al­ways been a headache for own­ers of th­ese ve­hi­cles, which have ac­tu­ally ex­isted in the un­der­ground mar­kets in some coastal har­bor ci­ties in China.

Ac­cord­ing to the China Au­to­mo­bile Cir­cu­lar As­so­ci­a­tion, among the 21.98 mil­lion autos sold in China in 2013, 1.07 mil­lion are im­ported fin­ished cars. And among the im­ported cars, 83,000 were de­liv­ered di­rectly from their pro­duc­tion bases, by­pass­ing au­tho­rized deal­ers.

In Shang­hai’s FTZ, the par­al­lel-im­port mar­ket will be un­der reg­u­lar le­gal and pol­icy su­per­vi­sion.

To solve the after-sales ser­vice prob­lem, Shang­hai’s FTZ ad­min­is­tra­tive com­mis­sion will im­ple­ment a qual­ity sys­tem for par­al­lel-im­port au­to­mo­biles that will fea­ture the same qual­ity war­ranty, re­call and in­ves­ti­ga­tion poli­cies as for ve­hi­cles sold by au­tho­rized deal­ers.

Re­quire­ments for auto deal­ers wish­ing to join the pro­gram in­clude hav­ing been in the auto business for more than five years, mak­ing a profit con­sec­u­tively for the re­cent three years and hav­ing an­nual sales of over 400 mil­lion yuan ($67 mil­lion) in the last fi­nan­cial year.

They also must have au­to­mo­bile re­pair ser­vice, and a parts sup­ply net­work and fa­cil­i­ties match­ing the size of their op­er­a­tion, and they should have wholly-owned sub­sidiaries or hold­ing com­pa­nies, which are qual­i­fied to sell ve­hi­cles regis­tered in the FTZ.

About 20 deal­ers are ap­ply­ing to take part in the par­al­le­limport of cars, and the first par­al­lel-im­port car will prob­a­bly be avail­able in Shang­hai by the end of this month. Res­i­dents from the af­flu­ent Yangtze River Delta will be the main tar­geted con­sumers of th­ese cars.

If the pro­gram proves suc­cess­ful in Shang­hai’s FTZ, it will prob­a­bly be ex­panded to the FTZs in Tian­jin, Fu­jiang and Guang­dong for even larger ex­per­i­ments, and then to the whole coun­try.

If so, sales of do­mes­ti­cally made car brands could suf­fer. In the first 11 months of last year, the over­all sales of such cars dropped by 17.34 per­cent year on year, and their mar­ket share de­creased 5.3 per­cent year-on-year, ac­cord­ing to the auto cir­cu­lar as­so­ci­a­tion.

GAO ERQIANG / CHINA DAILY

An auto parts

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