New Program to Improve Competition for Luxury Cars in China

11. February 2015

In April 2015, the Chinese certification authorities announced a pilot program which will take place within Shanghai’s free trade zone. This program will allow unauthorized dealers to sell imported cars within China. They are calling the program “parallel imports”. Until now, selling imported cars on the Chinese market was limited to official dealers who artificially inflated their prices to be far higher in China than other countries. The purpose of the new program is to promote competition, lower costs and improve the customer’s choices.

According to a lawyer who attended a closed-door seminar this pilot program is a part of a broad anti-monopoly campaign by the Chinese government to improve market conditions and bring down prices of imported cars. One such example of over-inflated pricing would be a BMW 650i xDrive that sells in the United States for approximately $97,900 (USD), would sell in China for about $320,179 (USD) (2,000,000 Yuan) after taxes.

The current situation has caused the establishment of a “grey market” for auto sales. The “grey market” consists of unauthorized dealers selling cars at a reduced price, but buyers have been cautious due to concerns related to warranty and after-sales-service on unauthorized vehicles. One of the most important conditions in the new program is that buyers will now be legally entitled to warranty packages, regardless of whether the imported car came from an authorized or unauthorized dealer channel.

More than 20 dealers have already applied to be registered for the new program, which will allow them to sell luxury cars at a 10-20 percent discount.

In 2014 sales of premium cars rose by more than 20 percent to around 1.6 million vehicles according to consultancy Automotive Foresight (Shanghai) Co Ltd. Although still growing, premium cars only make up about 10 percent of China’s total car sales. The new program may support even stronger growth in the premium automotive segment.

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