Antitrust investigation continues to push for continued price cuts for parts and models

The storm of antitrust investigations is now intensifying rapidly. In the automotive sector, the National Development and Reform Commission (NDRC) has launched probes into major players such as Chrysler, Audi, and Mercedes-Benz to investigate alleged monopolistic practices, while also completing investigations into 12 Japanese companies. As the traditional sales season approaches, the market is witnessing a wave of price reductions—gold for some, silver for others, but not all models are seeing significant drops. For instance, Chrysler has reduced the official guide price of the Grand Cherokee SRT8 by 65,000 RMB, and the 5.7L Zunyue model by 45,000 RMB. Additionally, dealers were instructed to cut prices on 145 car accessories by 20%. However, it's reported that sales of these two models in Beijing remain sluggish, with no price cuts on more popular models. BMW China also announced a reduction in wholesale prices for original parts starting August 11th. Body parts saw a 45% drop, generators fell by 40%, batteries by 25%, and brake discs by 20%. Some Japanese automakers have also followed suit, cutting prices on various components—up to 29% on certain parts, 24% on boosters, and 16% on radiators. Zhang Yi, a member of the China Automobile Association’s Expert Committee, noted in an interview that the price cuts aren't solely due to antitrust actions. Most of the adjustments this year have been in spare parts. He suggested that one reason could be antitrust pressure, while another is poor sales performance. Many dealers are selling cars at a loss, and with the luxury car market struggling and inventory piling up, price cuts have become a form of promotion. After losing money on car sales, dealers rely heavily on after-sales services. High repair costs can deter customers, so lowering prices helps retain them. The NDRC’s recent announcement focused mainly on auto parts, which is a positive step toward maintaining market order and promoting fairness. Dong Yang, the secretary-general of the China Automobile Association, stated that the price cuts on high-end models are beneficial. He pointed out that profits on imported cars have been high, and the authorities finally taking action is good for consumers, though it may benefit premium car buyers more than those looking for lower-priced options. Since 2011, anti-monopoly investigations in the automotive industry have been ongoing for three years. Currently, regulatory efforts continue to intensify, with Lexus and Honda joint ventures being questioned, and the Mercedes-Benz Shanghai office under investigation. Eleven Audi dealers in Hubei Province traveled to Beijing for interviews with the NDRC regarding Volkswagen Audi. For domestic brands and Chinese consumers, how will these investigations affect the market? Zhang Yi believes the short-term impact is limited. He explained that the consumer base for imported luxury cars remains small, and although it grew quickly in the past two years, the market has seen price cuts for the last two years. With the European debt crisis and the U.S. financial crisis reducing demand in traditional markets, many luxury car manufacturers shifted their focus to China, leading to oversupply and heavy inventory. To reduce capital pressure, some sellers are willing to sell at a loss. Guo Jie, a commentator from the Voice of the Economy, highlighted that the current investigations mainly target parts and components. The ratio of vehicle to parts is imbalanced, with the proportion of parts far exceeding the global average. Therefore, the NDRC is imposing penalties in this area. While some luxury car parts have already seen price reductions, whole vehicles are still largely subject to market dynamics. Popular models are still difficult to purchase, and waiting times remain long. Thus, asking for further price cuts is challenging.

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