Abstract After years of “smashing the car” on the road of plundering the monopoly profits of the Chinese market, US and European Japanese automakers will have to step on the “brakes” urgently. Recently, the Secretary-General of the National Development and Reform Commission Li Pumin...
After years of "smashing the car" on the road of arbitrarily plundering the monopoly profits of the Chinese market, the US and European Japanese automakers will have to step on the "brakes" urgently.

Recently, Li Pumin, secretary-general of the National Development and Reform Commission, said at a press conference to promote the development of the producer service industry that the investigations of Audi and Chrysler showed that the two car companies did have monopolistic behavior and would be punished accordingly. He also revealed that "the National Development and Reform Commission recently completed an investigation into the monopoly of auto parts and accessories in 12 Japanese companies and will impose penalties according to law."

This is not the first time a Japanese component company has eaten a “penalty”. The US Department of Justice reported on September 26 last year that nine Japanese companies, including Hitachi Motors, Mitsubishi Electric, and Mitsubishi Heavy Industries, admitted to manipulating US auto parts prices, and would pay more than $740 million in fines.

"No country will tolerate foreign-funded enterprises to earn monopoly profits in their own countries." Cui Dongshu, deputy secretary general of the China Passenger Car Association, told the reporter.

It is foreseeable that with the deepening of the anti-monopoly investigation, the cost of luxury cars, parts prices and maintenance will decline, and Chinese consumers will usher in a better consumer environment. For the relevant car companies and dealers, the impact is hard to avoid, and the entire Chinese auto industry will undergo major changes.

The investigation began at the end of 2011

“The National Development and Reform Commission’s investigation of automobiles and accessories began at the end of 2011. Based on extensive consultations with relevant companies, industry associations, experts and lawyers, we have made serious violations of the anti-monopoly law for some automobile and spare parts manufacturers. The dealer conducted an investigation."

Li Pumin gave a detailed introduction to the latest developments in the investigation. The Shanghai Development and Reform Commission's investigation of the Chrysler and Hubei Provincial Price Bureau on Audi is nearing completion. Whether Mercedes-Benz has a monopolistic behavior is investigating and collecting evidence. On August 4th, the NDRC's price and anti-monopoly department conducted an investigation into Mercedes-Benz's Shanghai office. Last week, the anti-monopoly branch of the Jiangsu Provincial Price Bureau also conducted anti-monopoly investigations on Mercedes-Benz dealers in five cities including Suzhou, Wuxi and Danyang.

"Including the automobile industry, many industries now have anti-monopoly measures. This is to cater to the needs of comprehensively deepening reforms and let the market play its biggest role." Insiders told the Shanghai Securities Journal.

The relevant state departments have focused on the “zero ratio” problem of excessive auto parts prices for anti-monopoly investigations in the auto industry. The so-called zero ratio is to disassemble a whole vehicle. According to the price of the parts quoted by the manufacturer's authorized 4S shop, divided by the price of the new car manufacturer, the ratio can reflect whether the manufacturer has obtained excessive profits through the repair and maintenance. Normally, “zero ratio” is considered reasonable within 300%, and the proportion of domestic luxury car brands usually exceeds 400%. In April this year, the Beijing Mercedes-Benz C-Class W204 topped the list with 1273% of complete vehicle parts in a zero-ratio report issued by the China Insurance Industry Association and the China Automobile Maintenance Association.

Car manufacturers: price cuts or virtual and snakes

In the face of anti-monopoly investigations, a number of multinational automakers have begun to announce the reduction of parts prices, including Chrysler, Audi and Mercedes.

At present, China's luxury car market is dominated by foreign brands, especially German brands, of which Audi, BMW and Mercedes-Benz jointly share about 70% of the market.

Zhang Yu, Managing Director of Automotive Foresight Consulting, has been engaged in automotive industry consulting services for many years, and is well versed in the high profit margins brought by the Chinese market to high-end car manufacturers. In his view, many car manufacturers selling a car in the Chinese market, the need to sell 10 cars in the overseas market to achieve, this abnormal phenomenon should be corrected. Zhang Yu believes that high-end automakers such as luxury cars are undoubtedly the most affected in this wave of anti-monopoly operations.

According to media reports, Land Rover Range Rover's price in the Chinese market is at least RMB 1.89 million ($305,000), and its price in the US market is only about RMB 540,000 (US$ 87,000).

"Anti-monopoly investigation should not be a short-term behavior, but should establish long-term supervision measures and mechanisms. Otherwise, it may not be able to reduce too much, and will soon restore the original price." Cui Dongshu is not worried about the final result.

In fact, there are also many people in the industry who have warned that on the cusp of the turmoil, it is not ruled out that auto companies have to deal with the inspections of relevant state departments by reducing the price and violating the snakes.

Taking Chrysler as an example, it has recently lowered the price of some products and spare parts, and the average price of spare parts has dropped by 20%. Among them, the price of the flagship product Jeep Grand Cherokee SRT8 was lowered by RMB 65,000, and the price of the Grand Cherokee 5.7L flagship version was lowered by RMB 45,000.

Market sales experts pointed out that it seems that the price reduction of these cars is very large, and it seems that the car companies are determined to be very big, but everyone who knows the eyes knows that these cars sell very little in the Chinese market every year, like Jeep. The Grand Cherokee SRT8 is less than 50 cars each, and the price reduction of such a model is obviously just a look.

Dealer: 4S shop sales model is expected to break

After automakers are soft and take the initiative to cut prices, auto dealers are expected to get a chance to breathe freely.

The auto industry people told the Shanghai Securities Journal that the current domestic auto 4S stores are mainly authorized by the brand, and the single store implements a single brand operation and is managed by the general dealer. The current 4S shop model has developed to its peak, and more policies need to be loosened in the future to support the diversified development of the car sales model. As the monopoly pattern is broken, the automobile circulation market will be reshuffled, changing the current imbalance in resource allocation.

Some automotive industry researchers believe that anti-monopoly investigation will have a profound impact on the entire industry, especially in the circulation field, the break of the monopoly pattern will help optimize the allocation of market resources. In view of the recent measures taken by the SAIC to cancel the record of the general distributors and authorized dealers, on the one hand, the large-scale auto dealers with strong strengths will develop diversified business models such as “automobiles”, and the future 4S stores will break the current status of single-brand automobile sales. It is expected that there will be "car stores" and "automobiles" and other business models, including the huge group, Yaxia Automobile, etc.; on the other hand, it is conducive to the development of the imported car market, and it is like a company that provides wholesale trade services like SINOMACH.

Parts dealers: or to deepen reform "first battlefield"

The monopolistic behavior of automakers mainly includes two aspects: one is to limit the price of the whole vehicle; the other is to limit the spare parts price and maintenance price of the 4S shop. Seniors in the automotive industry said that some brands have lowered the price of some models, but the zero ratio of other models is still not low. In the world, the ratio of zero to normal is 2 to 1 or 3 to 1. In turn, it is speculated that the price reduction of multinational brands in the future may be more in the price of spare parts than the whole vehicle.

Dr. Qiao Liang, executive director of the China Automotive Engineering Society, told the Shanghai Securities Journal that many auto parts and spare parts prices are currently high, due to the monopoly of spare parts supplied by manufacturers, and dealers have no right to speak. Some spare parts were originally required to be a single change for only $50, but the manufacturer required consumers to change groups, the price is as high as $500. This replacement model leads to the monopoly of the manufacturers on the price of spare parts.

In Cui Dongshu's view, the fundamental reason for the monopoly position of Japanese component manufacturers is that they have the core technological advantages and high technical barriers. It is difficult to change the anti-monopoly policy alone. Therefore, he suggested that in addition to asking for price cuts, it is also possible to require parts companies to also enter into joint ventures with Chinese local companies to enhance our technological strength and to change the monopoly pattern.

In fact, the monopoly of auto parts has attracted wide attention and attention. Once the automakers’ monopoly in this field is broken, the auto parts industry is likely to take the lead in introducing more adequate market competition mechanism and become a deeper market reform in the auto industry. The "first battlefield."

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