China: parallel imports could be key to luxury auto price decreases image

The world’s largest auto market has become the crucial territory for every global carmaker, but the country’s practices and policies are sometimes far from traditional.

The Chinese government has been tackling for years the increased spending on luxury items, calling for a more cautious approach – and while it seems far-fetched, the latest move falls in line with the strategy. China is now taking a swing at foreign luxury brand such as Audi, BMW and Mercedes by officially allowing unauthorized dealers to offer imported cars, dubbed “parallel imports”, as a way of forcing the former to cap high-end car prices. Beijing has publicly unveiled a pilot program, officially starting next week in Shanghai’s free trade zone, designed to promote competition and offer new choices to Chinese buyers. On the other hand, sources close to policymakers say the move is just the latest in a series that seek to align car prices with other markets – with China reportedly having to pay far higher for the same luxury models.

The premium automakers now can add this to the growing list of concerns in China: the world’s biggest car market and the second largest in terms of luxury sales is expected to further slow its expansion, tensions arose with dealers late last years over weakening profits and a recent price fixing probe triggered massive retaliations from regulators. According to consultancy firm Automotive Foresight, deliveries of luxury autos jumped by at least a fifth in 2014 to approximately 1.6 million units, making up around 10 percent of the total market.

Via Reuters