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August 13, 2014

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Shanghai GM in monopoly probe

SHANGHAI GM, the joint venture between SAIC and General Motors, revealed yesterday that it was one of the companies questioned in an investigation into monopoly practices in the auto industry in China.

“The company assisted with the industrywide research and investigation by the National Development and Reform Commission, but that’s all past tense,” a public relations officer with Shanghai GM told Shanghai Daily.

He declined to reveal when the investigation into Shanghai GM ended or what conclusion was reached by the authority.

In a statement released on Monday in response to the investigation that has found Chrysler, Audi and 12 Japanese auto parts makers guilty of pursuing a monopoly, Shanghai GM said it was committed to reducing consumer spending on car purchase and maintenance.

It said all its main products were “priced at a reasonable level.”

The average sum of replacing all the parts compared to the price of buying a new vehicle was at a reasonable level for Buick, Chevrolet as well as Cadillac vehicles, around three times, equal to the average level in the US and European markets.

The discrepancy in prices for foreign cars, and especially spare parts, in China and abroad is believed to be the target of the current anti-trust investigation.

For example, replacing all the spare parts in a Mercedes-Benz C-Class can be 12 times more expensive than buying a new car, according to a report released by the Insurance Association of China and China Auto Maintenance & Repair Association in April.

“There are no plans for Shanghai GM to slash any prices”, the public relation officer said, though many auto companies have chosen to do so in response to the current anti-trust sweep.

Last Friday, Guangzhou Honda and GAC Toyota said they would cut the prices of spare parts without specifying details, just one day after BMW announced it would lower the wholesale prices of more than 2,000 spare parts by an average 20 percent.

Earlier price reductions for spare parts by Audi and Mercedes-Benz were up to 38 percent while price cuts for certain Jeep and Land Rover car models were around 10 percent.

Jochen Siebert, managing director of JSC (Shanghai) Automotive Consulting, said the Chinese regulator was correct with its assessment of anti-competitive behavior regarding the price of replacement parts. However, the government is partly responsible, he said, for administrative measures for branded vehicle sales since 2005 allow carmakers to build a closed sales network of cars and replacement parts that gave them too much say in pricing and a chance to pursue a vertical monopoly.

“OEMs (original equipment manufacturers) control the distribution and don’t allow the original part suppliers to sell to independent repair shops. For those original spares parts sold at the carmaker-authorized dealerships and independent repair shops, the price difference could be up to 100 percent before the price decreases of last week, while in Europe the difference is only about 20 percent,” he said.

The government should and will change the industry policy to get it in line with the anti-monopoly law since 2008, he added.

Violators of the law can be fined between 1 and 10 percent of annual sales revenue.


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