Foreign car firms investigated by Chinese government

Posted on August 21st, 2014 by Rob Marshall

flagThe longer I am involved with writing about the new car industry, the more I find that all it is interested in is solely churning out new vehicles, despite its PR-departments working hard on the smoke-and-mirrors rhetoric. Yet, the European motor industry, especially, continues to have a tough time and, despite the daily press releases that pour into my Inbox, saying how ‘wonderful’ sales are of its latest safe and green products, with meaningless percentage growth figures to substantiate the spin (although accessing actual sales figures and not just self-made manufacturer registrations is virtually impossible), unsold vehicles languish in fields all over Europe. The UK market is similarly not as rosy as one might think, just contemplate at the misfortunes affecting Honda’s Swindon plant.

To try and diversify, carmakers have been scrambling over each other to capitalise in emerging markets, the chief of which is China. Yet, they have been faced with not only a completely different culture and ethos, something that the Rover’s ‘Phoenix Four’ was criticised of underestimating to the company’s detriment, but also a totally different system of government to that of the West. As Eric Idle sang, in his ditty about the Chinese people, in the live Monte Python Show last month,

“They are still a little communese, but Americans don’t need to fret, now China has bought all their debt.” (sic).

Even so, one can understand why China, despite its internal problems, is more interested in building its own infrastructure, than making money for outsourced foreign firms.

This is one reason why many non-Chinese car companies have had to form (possibly uncomfortable) bedfellows with domestic firms, in order to gain the political nod to access the potentially-lucrative Chinese new car market. Even so, with the country’s government cracking down on foreign car firms recently, is it all going sour? Shortly after the Chinese authorities raided Mercedes Benz’s Shanghai-based office last month, Audi and Chrysler were also accused of pursuing monopoly practices. A chilling comment, from China’s National Development and Reform Commission (NDRC), was that they will be punished accordingly in the future.”

Still, it appears that the increased scrutiny on non-domestic firms has intensified further, with today’s news that Toyota’s luxury offshoot, Lexus, is also being targeted. Although the Japanese firm insists that it is co-operating fully, the Chinese authorities still have not given more details about what constitutes a monopoly, in its view. Yet, it is thought that it is a political response to Chinese consumers complaining about the high prices of imported vehicles and associated spare parts and, if that is the case, price slashes, sanctions and fines will harm profitability. Reports have circulated that foreign companies (not solely carmakers) are feeling vulnerable in the country and some observers are reported to have suggested that multinational corporations make easy political scapegoats.

Surely, the supposedly ‘mature’ motor industry of the West realised that operating within a country, controlled by a communist government with no opposition, is fraught with such risks? Maybe the attraction of shifting new metal dwarfed those considerations? Yet, it proves that building and operating a foreign car business in China might not be the money-spinning saviour that it was once thought to be.