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China Said to Be Probing Foreign Automakers Over Parts

July 18 (Bloomberg) -- China is examining whether foreign auto manufacturers are preventing component makers from selling spare parts to any dealers besides those authorized by the car companies, people familiar with the matter said.

The National Development and Reform Commission, China’s economic planning body, is probing practices at Stuttgart, Germany-based Daimler AG’s Mercedes-Benz, Volkswagen AG’s Audi, Munich-based Bayerische Motoren Werke AG and Japanese carmakers to see whether prices of spare parts are being artificially boosted, the people said, asking not to be identified because the probe hasn’t been made public.

Chinese state media have criticized car producers from abroad for overcharging consumers for spare parts. The Transport Ministry released a proposal last month to encourage the “free flow of auto repair parts” and urged vehicle makers to provide original parts to independent mechanics.

BMW and Wolfsburg, Germany-based Volkswagen declined to comment, while representatives at Mercedes said they weren’t aware of an investigation against the company. The NDRC didn’t reply to a fax seeking comment.

While figures aren’t publicly available, the spare-parts business only makes up a small part of automakers’ profit, according to John Zeng, managing director at LMC Automotive research company in Shanghai. Any financial impact from a probe would be bigger on dealers than on car manufacturers because of their reliance on after-sales service, Zeng said.

Pricing Questions

Foreign companies from baby-food maker Danone to computer manufacturer Apple Inc. have been targeted by regulators or state media in China for pricing or business practices. Qualcomm Inc., the world’s largest chipmaker for smartphones, said in November that the NDRC began a probe related to an anti-monopoly law.

Last December, state broadcaster China Central Television accused foreign automakers such as Mumbai-based Tata Motors Ltd.’s Jaguar Land Rover, Tokyo-based Fuji Heavy Industries Ltd.’s Subaru and Audi of overcharging for spare parts. It cited the brands’ monopolistic hold as the reason for the “unfair” prices.

Jaguar Land Rover said at the time that it abides by China’s laws and determines pricing based on market conditions, while Audi said it applies the same standards for pricing of spare parts worldwide. Subaru said the price of its parts in China tends to be higher because it has no manufacturing plant in the country.

China fined six dairy companies in August, including Mead Johnson Nutrition Co. and Danone, a combined 670 million yuan ($110 million) for price fixing, a record penalty for violating anti-monopoly laws.

The Economic Information Daily reported earlier today on the spare-parts probe, citing unidentified people at auto companies, the industry association and dealerships.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net; Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Robert Valpuesta, Tom Lavell

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