China should probe foreign luxury carmakers over prices: Xinhua

SHANGHAI - Reuters

Security personnel walks inside a BMW factory in Shenyang, Liaoning province, July 6, 2013. BMW's sales rose faster in June than at Audi and Mercedes as demand from China and the United States helped the German luxury car maker to extend a lead over its two main rivals in the first six months of the year. Picture taken July 6, 2013. REUTERS/Stringer

Foreign carmakers are reaping exorbitant profits selling imported luxury cars in China and should face an anti-trust investigation, the official Xinhua News Agency said yesterday, in what may amount to a shot across the bow of foreign auto firms.

Xinhua said that in the wake of investigations into how foreign companies in other sectors price their goods, the question of imported cars had become a contentious topic.

Foreign milk formula makers and pharmaceutical companies have come under intense regulatory scrutiny in recent weeks, especially over pricing. Separately, Chinese police have accused British drugmaker GlaxoSmithKline of bribery.

Analysts, however, said they did not expect foreign carmakers to become the latest target of China’s focus on prices.

“Milk powder pricing is a more imperative problem, as it’s baby food and concerns ... families,” said Yale Zhang, managing director of Automotive Foresight (Shanghai) Co Ltd, a consultancy and industry research firm.

“Luxury cars are different. Some people in China have plenty of money and are indifferent to high pricing.”

China has become a key market for the makers of luxury cars, with 2.7 million expected to be sold each year by 2020, overtaking the United States as the world’s leader in the segment.

The Xinhua report said some imported cars were twice as expensive in China than in overseas markets.

It cited a man surnamed Qu who had bought an Audi Q7 in Canada for 78,000 Canadian dollars, or about 460,000 yuan ($75,000), and who was shocked to see the same car on sale in China for 1 million yuan.

It also said similar price differences existed between some unspecified Land Rover models made by Jaguar Land Rover as well as the BMW X5. JLR is owned by India’s biggest carmaker by revenue, Tata Motors Ltd.

Xinhua did not make clear where it got the price information it cited. The automakers could not immediately be reached for comment.