China: Auto imports unlocked in Shanghai

In another challenge to foreign carmakers Shanghai’s new free trade zone has just legalised the importation of “parallel imports,” cars manufactured to be sold within the US. This creates much stronger competition for the authorized Chinese auto dealers since the unofficial dealers are selling the same cars for as much as a 20 percent discount.

The most popular parallel imports are European brands such as BMW, Audi, and Mercedes. The Audi Q7 sells for $106,000 in Shanghai, while the car is listed for only $48,900 in the US, providing enormous incentives for parallel imports. This is a further blow to foreign automakers since China forced them to lower their prices for parts and cars last year after an investigation alleging anti-competitive behaviour. With the legalization of unauthorized imports, auto manufacturers are looking to prevent parallel imports to China from the US side by prohibiting US dealers to sell vehicles to buyers who they suspect to be selling the cars to China.

Max Warburton, an analyst at Bernstein Research, said “The [carmakers] have lost the battle on the Chinese side, on the US side they are throwing everything they can think of at it.” Auto manufacturers argue against parallel imports saying that the imports may not comply with Chinese regulations.

Full Content: FT

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