Chrysler, Audi and 10 spare parts suppliers to be punished in China

Article by Christian A., on August 9, 2014

China will impose punishments to 12 companies – two carmakers and 10 spare parts companies – for violating the country's anti-monopoly law. According to China’s National Development and Reform Commission (NDRC), it had found Chrysler in Shanghai and Audi in Hubei to be engaging in monopolistic behavior.

NDRC has also finished its probes into 12 Japanese auto-parts makers and will impose punishment to companies found to be violating the law, commission spokesman Li Pumin said. Under China’s anti-monopoly law, the NDRC can impose fines ranging between one percent and 10 percent of a company's revenues for the previous year.

According to Colin Liu, a lawyer in the auto industry, the amount of fines set by NDRC typically depends on how cooperative the companies under investigation are. Industry experts quipped that the carmaker have too much leverage over car dealers and auto part suppliers, which have allowed them to control prices – a move regarded as a violation of the country’s anti-trust laws.

Yale Zhang, managing director of consultancy Automotive Foresight (Shanghai) Co. Ltd., said that monopolistic behavior is “quite rampant” in the auto industry and NDRC is first targeting imported luxury brands since the problem is most severe in this sector.

He added that such punishments would serve as a warning signal to the auto industry. Zhang remarked imported luxury cars in China have prices that are on average two-and-a-half to three times higher than their prices in the United States.

The carmakers, however, claim that the difference in prices is due to higher import duties and other taxes. State media have criticized foreign carmaker for selling imported cars at higher prices than in other markets and overcharging for spare parts.

Antitrust officials have also commenced probes into Mercedes-Benz dealers in five cities. Officials also recently raided the carmaker’s office in Shanghai.

In May, Fiat Chrysler chief executive Sergio Marchionne unveiled a five-year plan that includes investing of EUR55 billion ($76.6 billion) to transform Alfa Romeo, Maserati and Jeep into global brands. The plan aims to more than double the company’s earnings before interest and taxes (EBIT) from EUR3.5 billion in 2013 to EUR8.7 billion in 2018. The plan also calls for a 61-percent surge in annual deliveries to 7 million vehicles in 2018.

Fiat Chrysler plans to invest EUR5 billion in five years into Alfa Romeo to launch eight new vehicles and increase deliveries more than fivefold. It considers Alfa Romeo as potent enough to boost its profit as the marque’s vehicles command higher prices than those of Chrysler, Dodge or Fiat badges.

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Topics: chrysler, audi, china

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