Dealer files plan for parallel imports

Move will help lower prices of imported vehicles

A State-owned auto dealer in Shanghai's free trade zone has submitted a plan to allow parallel imports of cars for regulator's approval as the nation continues its efforts to fight against monopoly in the auto industry, Shanghai-based Jiefang Daily reported on Sunday.

Parallel imports refer to genuine goods intended by their manufacturer for use in one country or region, but imported and resold in another country or region without the permission of the manufacturer or the authorized distributor.

Shanghai Waigaoqiao Automobile Exchange Market Co, the largest imported car market in East China and a testing ground for the China (Shanghai) Pilot Free Trade Zone, has submitted a proposal for parallel imports to the Ministry of Commerce (MOFCOM) for review, the newspaper said.

Once approved, it will open a distribution channel for imported cars that is not authorized by automakers, which would bring down the prices of imported vehicles by at least 15 percent, the report said.

"Generally speaking, parallel imports are legal in China, and the increasing competition will break monopoly and push down the prices, benefiting consumers," Dai Jiapeng, a lawyer at Beijing Juntai Law Firm, told the Global Times Sunday.

China has never banned parallel imports. However, existing rules require car distributors to file with the regulators including the State Administration for Industry and Commerce (SAIC) and the MOFCOM, and the fact that only government-endorsed distributors are qualified to engage in the business makes it easier for them to manipulate prices.

The SAIC announced on August 1 that the auto distributors will no longer be required to file with the market regulator starting from October, amid an anti-monopoly campaign in the auto industry.

The National Development and Reform Commission (NDRC), China's pricing regulator, has recently conducted anti-monopoly probes against foreign automakers and their domestic distributors following media complaints that Chinese consumers are overcharged for the vehicles and spare parts.

The NDRC announced on Wednesday that it had fined eight Japanese auto parts suppliers including Hitachi Ltd and Denso Corp a total of 832 million yuan ($136 million), and four bearings suppliers 403 million yuan for price-fixing practices.

Mercedes, Audi and Chrysler responded in late July and early August to the investigation by announcing price reduction of up to 30 percent for vehicles or auto parts.

If parallel imports of autos are deregulated, the sole distributors of imported premium cars will be placed at a disadvantage, and an elaborate pricing system of the automakers might also be disrupted, Dai said.

A sole distributor can sue automakers if it finds parallel imports in its area, but automakers are not liable if they can prove being unaware of the sales by other importers or distributors to the market designated under the sole distributorship contract, he noted.

However, some expressed doubts over the effectiveness of parallel imports in bringing down the retail prices.

"It is hard to say as yet that parallel imports will drive down the prices significantly," Su Hui, an expert at the China Automobile Dealers Association, told the Global Times Sunday.