• Thu
  • Dec 18, 2014
  • Updated: 6:48am
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CARS

Volvo cannot escape mainland carmaker probe

Analysts say investigation into car price fixing will expand to many more foreign brands

PUBLISHED : Thursday, 14 August, 2014, 1:28am
UPDATED : Thursday, 14 August, 2014, 8:03am

Volvo's mainland backing may have spared it from the first round of anti-monopoly investigations in the car sector but analysts say the Geely-owned carmaker cannot avoid government enforcers for long.

Luxury foreign brands have been targeted first by the regulators because of the high premium they charge on the local market and the investigations would continue to widen to more foreign brands such as Volvo and other American brands, said Andreas Graef, a Shanghai-based principal at consultancy AT Kearney.

"Because of the Geely ownership, Volvo has an advantage as of now. But when the investigators look at more foreign premium brands and companies, they will likely look at Volvo too," said Graef.

Volvo told the South China Morning Post that it was not being investigated by the National Development and Reform Commission (NDRC) and other government agencies.

Citing an unnamed NDRC official, a China Daily report yesterday said anti-trust investigations had spread to more than 1,000 foreign and local car companies, including manufacturers, suppliers and dealers, as well as state and domestically owned firms.

The NDRC last week said Germany's Audi and Chrysler of the United States had engaged in monopoly practices and Germany's BMW was under investigation. It has also completed probes into 12 Japanese firms for fixing prices of car parts and bearings.

Audi said it closely cooperated with the probe and would accept a penalty. Responding to media reports saying Audi would face a fine of 1.8 billion yuan (HK$2.26 billion), a spokesman yesterday said the probe had not been officially concluded.

Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight, said Audi's "cooperative attitude" could be used as a reference for other foreign carmakers being investigated.

"The first round of investigations has focused on premium brands with larger market share and making huge profits in China, but anti-monopoly practices are not limited to these carmakers," Zhang said.

Foreign brands like Volvo or Japan's Lexus, which do not sell as much, would be targeted as the scope of the probe widens, he said.

Top players in the premium-segment in the first half were German brand Audi, which has a 31 per cent share of the market, BMW, with 26 per cent, and Mercedes-Benz, with 17 per cent, according to a report by Citi Research. Volvo's share is 5 per cent.

Its products are less pricey because of its image and branding, Graef said. "Prices for Volvo are lower in general even in other markets, so they will be the second to look into," he said.

John Zeng, a director of consultancy LMC Automotive, said Volvo's mainland pricing is relatively reasonable and he saw its chances of being investigated as slim. But price reductions by its rivals would put pressure on Volvo, which already puts up with hefty taxes and tariffs because of its foreign status, he said.

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