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Rip-off of consumers on goods pricing must stop
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AT the street corner two blocks from a bakery I frequently visit, there is a dealership that sells new imported cars, mainly from Japan and Germany. I enjoy window shopping when I pass through and carefully inspect its new models parked outside. I cannot afford any of them.
Compared with other dealers, this one sells most of its vehicles at a fairer price, but it’s still much higher than the prices at major overseas markets that I’ve seen in auto magazines.
I know our government has imposed high taxes on automobiles produced in other countries, but hefty profit margins exist even when the portion of tax is deducted.
At the dealership, I found a luxury Japanese medium-sized SUV was being offered for about 400,000 yuan (US$64,500) but I know the prices for similar types in the US and Japan were around US$30,000, tax included.
I always wondered why there was such a big difference but lacked an answer until recently. Two separate antitrust probes into Chrysler and Audi have found that the two multinational carmakers have pursued monopolistic practices.
Li Pumin, spokesman for the National Development and Reform Commission (NDRC), told reporters that the Chrysler investigation was launched by the Shanghai Municipal Development and Reform Commission and the Audi probe was conducted by the Hubei Province Price Bureau.
Li also confirmed that the Jiangsu Province Price Bureau launched an antitrust investigation about two weeks ago into dealers of German auto giant Mercedes-Benz in five Jiangsu cities.
The NDRC is one of three government antitrust agencies in China. According to Li, the NDRC has recently finished investigations into 12 Japanese companies and found monopolistic behaviors in auto parts and bearing prices.
Auto giants announced price cuts immediately after government probes. But they didn’t do so until penalties were on the way. In a long period before that, prices for overseas luxury cars were unreasonably high.
Buyers exploited
Many of China’s newly rich are willing to pay the price, and it seems clear that foreign automakers use price differences based on their market dominance to exploit these Chinese buyers.
They may argue high prices are due to China’s steep taxes, tariffs and other charges.
But they themselves are largely to blame.
A full-size luxury SUV produced by a British automaker has one of its high-end models priced in China at 2.8 million yuan. But domestic buyers have to pay an extra 400,000 yuan because of the limited quota, so the V8 5.0 liter edition is actually sold at 3.2 million yuan in China. Its original price in the UK is only 835,000 yuan.
If someone imported the SUV from the UK to China, the price would be 2.04 million yuan plus tax, which means the British automaker could pocket more than 1 million yuan in profit for each SUV it sells in China.
At the same time, spare car parts are also far pricier than in other countries such as Germany, where consumers often buy them from less-expensive components suppliers. But in China, foreign automakers insist the parts be sold only through authorized dealers.
In China, prices for those authorized parts can be more than 10 times the price of a car made from the parts. In other countries, the car-to-parts ratio is usually 1:2 or 1:3.
Chinese consumers are being exploited, and it’s not just in autos. Chinese people and companies pay more for many foreign goods than do people in other markets.
Europeans, Americans, Japanese and South Korean people might see Chinese tourists flock to their department stores crazily shopping for commodities from garments to electronics.
But what they might not understand is that many Chinese were induced to do so as the price for the same product in China could be two or even three times higher.
Other examples abound.
An electric shaver being sold for 5,999 yuan at Shanghai department stores cost only 1,200 yuan in Japan.
From bottled instant coffee to blue jeans, from mobile phones to electric cookers, Chinese buyers have to pay much more money than their counterparts in other countries.
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