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Party over for Chinese profits?

A Chinese motoring organisation, a rough equivalent of our own Society of Motor Manufacturers and traders (SMMT), is investigating whether foreign car manufacturers are guilty of price fixing in direct contravention of the country's anti-monopoly law.

A Chinese motoring organisation, a rough equivalent of our own Society of Motor Manufacturers and traders (SMMT), is investigating whether foreign car manufacturers are guilty of price fixing in direct contravention of the country's anti-monopoly law. The China Automobile Dealers Association (CADA) has been collecting car price data on behalf of Chinese government agency, the National Development and Reform Commission (NDRC) since 2012. In the past the NDRC has fined companies found guilty of price fixing in other sectors, such as foodstuffs and luxury goods. The NDRC is investigating whether car manufacturers are guilty of setting minimum prices in Chinese dealerships, a practice that could be in violation of the country's anti-monopoly law of 2008. 

China is the world's largest car market and vital for the British car industry. Britain exports most of its car production. Premium marques like Jaguar Land Rover, Rolls- Royce and Bentley export more than 80% of their production and China is becoming the single most important market. Last year, for example, China became Jaguar Land Rover's single biggest market. The Chinese have a seemingly inexhaustible appetite for exactly the kind of luxury car that Britain produces and healthy sales are driving profits and funding expansion of UK production facilities. 

Luo Lei, deputy secretary-general of CADA confirmed that they had been asked by NDRC to provide car pricing data in advance of a formal investigation, saying: "We're looking at all brands, including those imported and those made by domestic joint ventures. We see there's a big difference in the prices of imported cars in China and their overseas prices. We're looking into that." CADA also said that it was comparing the overseas and domestic price of various models and brands of car, taking into account taxes, costs and profit margins.

The official Chinese news agency, Xinhua, published an editorial in July that claimed foreign car makers were making exorbitant profits on luxury cars and should face an investigation. It claimed that the price of some luxury models in China was as much as twice that paid outside of the country. The report specifically mentioned Audi and BMW. China is now a key market for luxury car makers, with an estimated 2.7 million being sold each year. It is expected to overtake the US as the number one luxury car buyer by 2020. This has meant big profits for British luxury marques but these could be at risk if prices are found to have been falsely inflated.

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