Bloomberg News

BMW Latest to Cut Prices in China Amid Antitrust Probe

August 07, 2014

Bayerische Motoren Werke AG (BMW) joined Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi in reducing prices of spare parts in China amid an antitrust investigation into the auto industry.

BMW will cut prices on more than 2,000 components by an average of 20 percent starting Aug. 11, the Munich, Germany-based automaker said in an e-mailed statement late yesterday. The company also said its authorized dealerships will set up more outlets in large cities including Beijing and Shanghai to sell original parts to independent workshops to help provide consumers more choice.

China, home to the world’s largest auto market, is stepping up scrutiny over how much foreign automakers charge for vehicles and spare parts. The government began looking into possible antitrust violations in the auto industry at the end of 2011 as state media accused carmakers for inflating prices and overcharging consumers.

“We haven’t seen this been done by anyone else, they’re the first,” said Yang Song, an auto analyst at Barclays Capital Inc. in Hong Kong. “If NDRC really wants all the spares to be sold to independent workshops, then they really need to change the regulation instead of calling for price cuts.”

In the first seven months of the year, BMW has cut prices on more than 3,300 pieces of original parts by an average of 15 percent, of which 108 products were cut by 20 percent to 50 percent, according to the statement.

Wider Access

To widen access to original components, BMW’s dealers have set up outlets in the cities of Guangzhou and Hangzhou to sell the parts to independent repair workshops, with more planned for major cities, the company said.

“Recently, the National Development and Reform Commission’s Price Supervision and Anti-Monopoly Bureau expressed great concerns over existing problems in the auto industry and after-sales service sector,” BMW said in the statement. “BMW has been paying close attention and in response, is making the effort to bring down wholesale prices and promoting the flow of original parts.”

Toyota Motor Corp.’s Lexus unit is waiting to see the outcome of its talks with the NDRC before deciding on its actions, said Tokuo Fukuichi, president of Lexus International. The company’s China unit is cooperating fully with the regulator, he said today in Japan.

Antitrust Probe

Antitrust officials in eastern Jiangsu province have begun investigations of Mercedes-Benz dealers in five cities including Suzhou and Wuxi, while Mercedes-Benz’s Shanghai office was raided by local NDRC officials, NDRC spokesman Li Pumin said in a briefing in Beijing this week. The government will also soon punish Chrysler Group LLC and Audi for engaging in monopolistic actions, he said.

Daimler plans to cut spare-part prices for its Mercedes-Benz vehicles in China by an average of 15 percent starting next month, while Audi’s Chinese joint venture said in late July that the brand would lower replacement costs of its parts by as much as 38 percent on Aug. 1.

The NDRC is undertaking the investigation to protect the competitive order of the auto industry and to safeguard consumer interests, Li said at this week’s briefing. The commission has completed an investigation into 12 Japanese companies and will soon announce the actions it will take, he said.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Chua Kong Ho, Subramaniam Sharma


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