FAW-Volkswagen cuts parts prices

Regulator's anti-monopoly probe, market competition may be reasons for reduction

FAW-Volkswagen Automotive Co said on Sunday that it plans to lower the prices of self-produced Audi models' spare parts, which analysts said is partly due to the Chinese government's anti-monopoly probe.

In order to improve customer satisfaction, FAW-VW will roll out big price cuts on spare parts starting Friday, according to a statement that FAW-VW's Audi section e-mailed to the Global Times.

The ratio of the total market price of all of the Audi A6L's components to the entire vehicle's price will be set at 291 percent, down from 411 percent, the statement said. The change will result in lower maintenance costs for customers, it added.

Analysts attributed the price cut to the pressure from China's antitrust regulator.

"The National Development and Reform Commission (NDRC) launched an investigation into the local auto market recently, which triggered the price adjustment among foreign automakers," Su Hui, deputy director of the auto market division at the China Automobile Dealers Association (CADA), told the Global Times Sunday.

FAW-VW's statement did not say that the price adjustment is a direct consequence of the probe, but revealed that its Audi section has "actively" cooperated with the "relevant investigation" launched by the NDRC, China's top economic planner.

Ge Shuwen, executive vice general manager with FAW-VW's Audi business unit, disclosed in the statement that the NDRC's Bureau of Price Supervision and Anti-Monopoly paid "utmost attention" to the country's auto parts industry at the beginning of the year.

CADA has been helping the Ministry of Commerce with the collection of evidence relating to possible anti-competitive behavior since early June, according to information published on the association's website on June 6.

Su said that while he believed the anti-monopoly investigation is good news for China's auto market where anti-competitive practices exist, he thought healthy development in the auto industry depends on what kind of measures the government will issue based on the final probe result.

According to Su, all car brands have to designate their own exclusive agency to operate in China. Such agencies have the power to control the pricing of all links in the process of selling a car, such as the vehicle's price and the fees of after-sales services, Su said, adding that this may create a monopoly in the market.

The regulator found that some automakers exploited their monopoly position and is likely to impose punishments soon, Shanghai-based Oriental Morning Post reported Friday. Officials from NDRC could not be reached by press time.

FAW-VW is not the only automaker to have decided to adjust their prices in China in recent days. UK premium automaker Jaguar Land Rover, a subsidiary of India's Tata Motors, was quoted by Reuters on Friday as saying that it would cut the prices of three models in China, averaging 200,000 yuan ($32,300), citing the antitrust probe.

Calls to Jaguar's Beijing branch remained unanswered by press time.

Because of the probe, China will see more automakers follow the actions of Audi and Jaguar, Su remarked.

In addition, analysts believed that neck-and-neck rivalry and weak demand in the luxury auto market were also other factors for the price cut.

Although Audi has performed fairly well in the Chinese market, it is confronted with fierce competition from foreign counterparts such as BMW and Mercedes-Benz, said Zhang Zhiyong, a Beijing-based independent industry watcher.

Mercedes-Benz is cutting the prices of its spare parts and service charges by 20 percent in China to further satisfy customers, Nicholas Speeks, head of the German luxury automaker's China unit, was quoted by media reports on Tuesday as saying.

"In order to maintain its current position, Audi needs to turn to price cuts to win price-sensitive customers in China as well," Zhang told the Global Times Sunday.

While the number of units that Audi sold in China surged by 18 percent in the first six months of this year, sales of BMW jumped by almost a quarter in the same period, Reuters reported earlier this month.

But Audi still led China's luxury auto market in the first half of 2014, selling 268,666 vehicles, exceeding the sales of BMW by 43,666 cars over the same period, Reuters said.