GREY-MARKET importers are undermining Hong Kong's authorised luxury-car sellers at a time when they are struggling to survive the regional economic downturn. Cars destined for markets such as Thailand or Indonesia are finding their way to Hong Kong as parallel imports, at prices up to 40 per cent lower than those authorised dealers charge. 'Hong Kong has become a dumping ground,' Jaguar Hong Kong general manager William Lau Kwok-ming said. One lawyer said no regulations governed parallel imports. 'A company engaged in parallel imports will not face any criminal charges, but may possibly face civil charges, as authorised distributors have the right to sue a company for damages or compensation,' he said. Mr Lau said: 'Parallel imports are good for consumers, not for authorised dealers.' Prices of vehicles sold by non-authorised dealers are as much as 40 per cent lower. For example, a Mercedes S320 can be bought for $888,000 on the grey market compared with $1.35 million from authorised dealer Zung Fu. The head of grey-market car vendor Richburg Motors Trading, Eric Wong, said: 'Who will buy if prices are not cheap, especially when the economy has slowed down?' The overall profit margin on grey-market imports is about 15 per cent - half that of the authorised dealers. Richburg saw sales reach $200 million last year from about $150 million in 1996. Richburg, one of the 200 grey-market traders in Hong Kong, has sold 150 luxury cars in the first quarter of this year. Mr Lau said: 'Activity in the grey market has put pressure on authorised dealers. Last year, about 10 per cent of cars sold in Hong kong were from the grey market. This year, the situation will be worse.' Hong Kong Car Traders Association figures show sales of Mercedes Benz, BMW and Lexus - considered key indicators of the market - suffered a sharp decline as a result of the combined effect of the SAR's retail slump and grey-market imports. During the first two months of this year, the non-profit body polled all 30 authorised Hong Kong dealers and found sales of Mercedes-Benz, distributed in Hong Kong by sole agent Jardine International Motor Holdings - plunged 54 per cent to just 43 units. Sales of BMWs dropped 37 per cent to 54, while Lexus cars had a 16 per cent fall to 31 units. An earlier government report said sales tumbled 33 per cent in volume in January from the same month last year. Jardine International Motor chairman Anthony Nightingale said: 'The grey market problem has been here for a while but it is now more serious. Another important thing is the economic slowdown in Hong Kong, which has depressed overall consumer spending.' An industry insider said at least five in every 10 Mercedes sold in the past six months arrived on the grey market.