15 August 2014

Doing Automotive Business In China

The culture of China is very different to the West. They may be building modern cities, driving cars in ever greater numbers and using modern technologies. In other ways things are not the same. How an antitrust probe is being conducted is proof positive of that.

You would think market forces would bring car prices to a fair level but it seems not. Brand spare parts can be heavily overpriced anywhere and usually are. Car makers make good money in this area. In many countries, as long as car makers don't get together and set prices through collusion, no action is taken.

In China, just the fact that car prices are too high compared to elsewhere is enough to be illegal. Excessive parts mark up is taboo as well. Investigators are moving in and car companies are reducing some car and parts prices. That in itself isn't earth shaking. What has concerned the European Union Chamber of Commerce in China is the manner it has been conducted.

Some companies have felt pressured to accept they are guilty and take punishments rather than challenge the findings. It has been claimed that foreign firms have been investigated while local firms practising the same sort of things are being excluded. In joint ventures, the overseas side of the business is named as the offending party but not the Chinese part of it. Chinese authorities disagree with that opinion.

What got me wondering is when Audi was accused of wrongdoing, they quickly stated they had offended with some of the laws and were willing to accept their penalty. They have been fined 30 million Euros. Do companies feel that contesting the decisions in court a waste of time? Are they concerned about the perception with Chinese authorities created by such an action? Would the publicity negatively affect their reputation in the eyes of the Chinese public?

Whatever the case, the feeling that many firms have that they are pressured to accept the rulings unquestioned is probably the way things are in China. Fighting for your rights may be a popular attitude in the west but not so much here. When doing business in foreign countries, you have to work with their standards. Quickly complying with rulings seems to be the smart thing to do.

Paying up and getting on with it

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