Cut-price parallel-imported vehicles could curb hefty price

Cut-price parallel-import cars are available to order a month after China gave the green light for cars directly imported from manufacturers to be sold by independent dealers.

The pilot plan in the Shanghai Free Trade Zone allows 17 companies to sell the cars, according to an announcement by the Shanghai municipal commission of commerce on Feb 10.

The move puts the parallel-import market under supervision. The Shanghai FTZ administrative commission implemented a quality control system for the parallel-import vehicles. It imposes the same warranty, recall and investigation policies as for vehicles sold by authorized dealers.

The commission also set strict restrictions under which dealers will be able to operate in the new system. For example, auto dealers must have been in business for at least five years, made a profit for three years consecutively and have sales of more than 400 million yuan ($64 million) in the past financial year.

The move will promote competition in the auto market and give consumers more choice but the main appeal of the cars is the price, which compared to other dealers, will be 15 to 20 percent lower. "It is certainly good news for Chinese consumers," said industrial analyst Zhang Zhiyong.

Wan Yang, a 32-year-old TV producer living in Beijing, was very glad to hear that parallel-import cars could be ordered and told China Daily she would consider buying one. "The price is very attractive and I am not worried about the quality of the cars. I am wondering if they have any special models that cannot be found in China. It would be cool to drive a car that no one else has." She currently drives an imported Mazda 3.

The hassle of transporting the car from Shanghai to Beijing was a concern for Wan. "Transportation will be an issue, it will be not worth buying if the transportation fee is too high," she said.

Shanghai is the first place in China where dealers can be authorized for parallel-import cars directly from manufacturers, according to a circular issued by the Shanghai municipal commission of commerce and the Shanghai Free Trade Zone administrative committee.

Industry insiders said luxury auto brands such as Mercedes-Benz, BMW, Maserati, Land Rover and Porsche were the top choices for parallel-import cars.

Among the 17 companies approved in the first batch of dealers, eight are from Shanghai and the rest come from different parts of China. All have been in the auto dealing business for a long time and have solid financial track records.

Some people questioned whether the low price of parallel-import cars would take away customers from authorized dealers under franchisees.

Daimler AG responded to China Daily via email: "We are aware of the pilot project that is to be launched at FTZ Shanghai. Yet it is too early to comment if and how this will affect the entire industry. We are very optimistic about sustainable growth and our future business in China."

Analysts estimated the imports will account for about 10 percent of China's car imports by 2019. Auto analyst Jia Xinguang said the possibility of parallel-import cars taking customers away from authorized dealers was low. He estimated the current number of parallel-import cars a year is between 30,000 and 50,000, which was not big compared with 1.5 million imports in 2014.

Jia said the purpose of parallel-import cars was to break the monopoly of authorized dealers and therefore lower the price of import cars in the Chinese market to a "reasonable" level.

He also said that manufacturers do not support the move towards parallel-import cars so most dealers import cars from the United States as the rules of franchisees there are relatively loose.

"But even in the US, Chinese parallel-import cars is a disputed area," Jia added. He said automakers should cut down the number of franchisees. The authorities should allow Chinese auto dealers to buy cars from foreign manufacturers directly and individual customers should be allowed to do their own oversea purchasing.

It is expected that if the pilot program proves successful in Shanghai, it will probably be expanded to the other three FTZs in Tianjin, Fujian and Guangdong for experiments in a larger scope, and to the whole country at last.