Mercedes-Benz and BMW are currently investigating the recent growth in unauthorized exports from the US to China, a practice that dents profits at the units in the world’s biggest auto market.
Top company executives believe the so-called “gray” area for imports coming overseas to China has seen a massive surge after the country’s officials passed law that regulated the registrations from Shanghai’s free trade zone – dealers are now allowed to import vehicles without approval from the foreign brands, adding pressure especially on the pricing of German brands. “We got concerned when it hit 4,000,” commented Steve Cannon, head of Mercedes-Benz USA, talking about the number of units sent from the US to China. Daimler AG, Mercedes’ parent, has increased since last year its efforts to mitigate exports of US models to China. They can impose penalties on US dealerships that sell the vehicles towards the gray China import market, even as the transactions are processed through unofficial channels.
China’s gray market existed for a long time, traditionally centered in the area of he northern port city of Tianjin, where about 50 percent of the Chinese auto market imports are delivered – and BMW executive Ian Robertson also expressed concern about the legal evolution of the parallel import business, after Chinese bills recently introduced made the gray market legal. The Chinese auto market, the largest in the world, has seen a slowdown in growth since 2014 – after years of double-digit gains – with the pressure now crippling relations between foreign brands and their local sales networks.