Mercedes guilty of manipulating prices in China
GERMANY’s Mercedes-Benz has been found guilty of manipulating prices for after-sales services in China, the official Xinhua news agency reported, adding to pressure on foreign car makers in the world’s largest vehicle market.
Brands including Volkswagen’s Audi, BMW and Mercedes-Benz are cutting prices for new cars and spare parts in an effort to appease Chinese regulators, which have accused some of them of anticompetitive behaviour.
Daimler, the parent company which makes the luxury MercedesBenz cars, said yesterday it was cooperating with authorities and declined to comment further.
Industries, from milk powder makers to electronics firms, have come under the Chinese regulatory spotlight in recent years as the government intensifies its efforts to make foreign companies comply with 2008 anti-monopoly legislation.
Anti-trust regulator the National Development and Reform Commission (NDRC) launched an investigation into the car industry following domestic media complaints that foreign car makers were overcharging Chinese customers for vehicles and spare parts.
The Xinhua report, which cited regulators, made no mention of pos- sible penalties for Mercedes. The regulator can impose fines of up to 10% of a company’s China revenues for the previous year.
Analysts at JPMorgan said the willingness of the German manufacturers to lower prices in China reduced the possibility of high fines but in the longer term could hit profitability. Mercedes-Benz said recently that it would cut prices on some spare parts an average of 15%, and BMW said it would cut prices an average of 20%, JP Morgan said. Audi has also said it would cut prices but did not specify by how much.
In the longer run, forcing European car makers to lower the price of spare parts and imported vehicles could see margins in China normalise to levels currently seen in Europe, JP Morgan said in a note earlier this month.
“We believe that this might hap- pen gradually over the next five years or more,” the brokerage said, adding it sees an effect on earnings per share of about 3% for German car makers.
They said that if the price of spare parts and services fell 20% in China, Daimler and BMW’s pretax profit would take a hit of about 1% in 2015, and Volkswagen’s pretax profit would fall by just less than 3%.
The Jiangsu Province Price Bureau found evidence of anti-competitive practices after raiding Mercedes-Benz dealerships in the coastal province and an office in neighbouring Shanghai, Xinhua said in its report on Sunday.
The European Chamber of Commerce in China has expressed concern that European companies were being unfairly targeted and were discouraged from appealing fines.
“The European Chamber has received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings,” it said last week.
Critics, however, say car makers have too much leverage over car dealers and car-part suppliers in China, enabling them to control prices.
The Xinhua report said the cost of replacing all the spare parts in a Mercedes-Benz C-Class could be 12 times more than buying a new vehi- cle, citing a report from the China Automotive Maintenance and Repair Trade Association.
Earlier this month the NDRC said it would punish Audi and Fiat’s Chrysler for monopoly practices.
Executives at Toyota said the Chinese government was looking into the car parts policies of its premium brand, Lexus.
Chinese media reported last week that Audi, the best-selling foreign premium car brand in China, would be fined about 250-million yuan ($40.7m).
Critics say car makers have too much leverage over car dealers and car-part suppliers in China