Auto body probes prices on NDRC’s behalf

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AN auto association has been investigating vehicle prices in China on behalf of the country’s top economic planner since last year, it was revealed yesterday.

But it might be too early to expect a full investigation into alleged price-fixing in the auto industry like the recent probes involving the pharmaceuticals, milk powder and gold sectors.

Luo Lei, deputy secretary-general of the China Automobile Dealers Association, said the association has been collecting data for the National Development and Reform Commission to check whether carmakers were making excess profits and setting minimum retail prices for dealers.

“However, there is no clear sign that the government will soon wield a big stick over the industry, making it the next target of its ongoing anti-trust campaign,” he said. “The auto industry is just one of many under close watch.”

Xinhua news agency last month urged an anti-trust investigation into auto companies that profited from the price gap between foreign cars sold abroad and in China. In some cases, the price of an imported car in China can be triple that of the same model abroad, Xinhua said.

Acknowledging the fact that foreign car brands hold a stronger position than local brands in the pricing of imported cars, Luo noted that these cars also face heavy taxes and strong market demand, both of which could explain their high prices. He said the association was looking into imported cars and also those from joint ventures and domestic companies.

Ye Sheng, auto research director at market research firm Ipsos, said the profits made by automakers in China could not be termed exorbitant as retail prices were set based on the production expenses as well as distribution and the latter was much more costly in China than abroad. “A 25 percent profit margin would be very reasonable for this industry, but many companies haven’t reached that level yet,” Ye said.

On claims that carmakers were setting minimum prices for dealers, Ye said that would be more about carmakers preventing vicious competition among dealers than an effort to have a bigger say in the distribution process.

“The capabilities of dealerships vary widely according to their locations, business experience and financial back-up,” Ye said.

Relentless discounting by highly capable ones can be disruptive, if not destructive, to others in the same area, he said.

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