* Daimler price fixing probe part of broader industry
* China regulators pressure Europe auto makers to lower
* Margins at China operations likely hurt in long run
(Changes dateline, adds analyst comment, detail of price cuts,
By Brenda Goh
SHANGHAI/FRANKFURT, Aug 18 Germany's
Mercedes-Benz has been found guilty of manipulating prices for
after-sales services in China, the official Xinhua news agency
reported, adding to pressure on foreign carmakers in the world's
largest auto market.
Brands including Volkswagen AG's Audi, BMW
and Mercedes-Benz are cutting prices for new cars and
spare parts in an effort to appease Chinese regulators which
have accused some of them of anti-competitive behaviour.
Daimler, the parent company which makes the luxury
Mercedes-Benz cars, said on Monday it was cooperating with
authorities and declined to comment further.
An array of industries, from milk powder makers to
electronics firms, has come under the Chinese regulatory
spotlight in recent years as the government intensifies its
efforts to make foreign companies comply with 2008 anti-monopoly
Anti-trust regulator, the National Development and Reform
Commission (NDRC), launched an investigation into the auto
industry following domestic media complaints that foreign
carmakers were overcharging Chinese customers for vehicles and
The Xinhua report, which cited regulators, made no mention
of possible penalties for Mercedes. The regulator can impose
fines of up to 10 percent of a company's China revenues for the
Analysts at JP Morgan said the willingness of the German
manufacturers to lower prices in China reduces the possibility
of high fines but in the longer term could hit profitability.
Mercedes-Benz recently announced that it would reduce prices
on some spare parts by an average of 15 percent and BMW said it
would cut prices by an average of 20 percent, JP Morgan said.
Audi has also said it will cut prices but did not specify by how
In the longer run, forcing European carmakers to lower the
price of spare parts and imported vehicles could see margins in
China normalize to levels currently seen in Europe, JP Morgan
said in a note earlier this month.
"We believe that this might happen gradually over the next
five years or more," the brokerage said, adding it sees an
impact on earnings per share of around 3 percent for German
They said that if the price of spare parts and services fell
20 percent in China, Daimler and BMW's pretax profit would take
a hit of around 1 percent in 2015, and Volkswagen's pretax
profit would fall by just under 3 percent.
The Jiangsu Province Price Bureau found evidence of
anti-competitive practices after raiding Mercedes-Benz
dealerships in the eastern coastal province and an office in
neighbouring Shanghai, Xinhua said in its report on Sunday.
The European Chamber of Commerce in China has expressed
concern that European companies were being unfairly targeted and
were discouraged from appealing against fines.
"The European Chamber has received numerous alarming
anecdotal accounts from a number of sectors that administrative
intimidation tactics are being used to impel companies to accept
punishments and remedies without full hearings," it said last
Critics however say automakers have too much leverage over
car dealers and auto part suppliers in China, enabling them to
The Xinhua report said the cost of replacing all the spare
parts in a Mercedes-Benz C-Class could be 12 times more than
buying a new vehicle, citing a report from the China Automotive
Maintenance and Repair Trade Association.
Earlier this month the NDRC said it would punish Audi and
Fiat SpA's Chrysler for monopoly practices. Executives
at Toyota Motor Corp said the government was looking
into the auto parts policies of its premium brand, Lexus.
Chinese media reported last week that Audi, the best selling
foreign premium car brand in China, would be fined around 250
million yuan ($40.7 million).
Foreign car brands, all of whom operate in China through
joint ventures with a local partner, have been fiercely
competing to up their share in the world's largest car market.
Daimler has said that it wants to boost China sales of
Mercedes-Benz cars to more than 300,000 cars a year by 2015,
while Audi expects China to make up 40 percent of its sales by
(1 US dollar = 6.1457 Chinese yuan)
(Additional reporting by Edward Taylor and Andreas Cremer;
Editing by Erica Billingham)