Comprehensive Anti-Monopoly in the Automotive Industry: Prices for Complete Vehicles and Components

Like Typhoon "Medim", which has just landed on the southeast coast, another super typhoon "anti-monopoly" is also sweeping the entire automobile industry. Under the guidance of the Central Government's spirit, the anti-monopoly ethos involving multiple ministries and commissions involved nearly the entire automotive industry chain including parts manufacturing, sales circulation, and aftermarket maintenance.

The center of the storm eye is in the area of ​​components upstream of this industrial chain. At the beginning of July, the Ministry of Commerce decided to attach the declaration of the establishment of a Sino-foreign joint venture company, Kelimei, to five companies, including Keliyuan, Toyota China, PEVE (the Toyota 80.5%), Xinzhongyuan, and Toyota Tongshang, in accordance with the Anti-Monopoly Law. The approval of restrictive conditions requires that Coili America “have to fulfill the external sales of the product within three years after it is put into production if the market has corresponding demand”.

However, in fact, the Ministry of Commerce’s anti-monopoly restriction on the “Kolimei Incident” that is difficult to get rid of with Toyota is only the beginning of this round of anti-monopoly tide. On July 22, Zhang Li, deputy director of the Comprehensive Strategic Research Department of the Research Institute of the Ministry of Commerce, said in an interview with the China Times reporter that “as the marketization process progresses, the anti-monopoly efforts will continue in a sustained and long-term manner.”

The anti-monopoly tide is coming

The focus of the anti-monopoly storm once again fell on the eradication of regional monopolies.

On July 21, the General Office of the State Council issued the "Guiding Opinions on Accelerating the Popularization and Application of New Energy Vehicles", requesting that the promotion of new energy vehicles be further accelerated and that local protection must be eliminated. Before this, in June of this year, the Ministry of Commerce issued the "Circular on the Implementation of a Monopoly Questionnaire Survey of the Regional Blockade Industry," and immediately conducted a "finding" survey of local government monopolies in response to auto companies nationwide.

“For example, does a company face discriminatory fees and charges when operating in a different place? When entering a local local market, does the company suffer from abuse of administrative power by local governments in other places, obstructing or restricting the entry of products or services,” Zhang Li said. In an interview with this reporter, the reporter said that unlike the previous anti-monopoly investigation, which was usually led by the government, the Ministry of Commerce's investigation in this round mainly focused on understanding the voice of auto companies. "To earnestly guarantee fair, fair and open competition in the market, we must establish a legalized marketing environment, and we must base ourselves on the needs of market players."

"At the end of last month, relevant investigation results have been reported to the Ministry of Commerce and are currently being further analyzed and compiled." On July 23, Luo Lei, deputy secretary-general of the China Automobile Dealers Association, disclosed to the reporter. The abolition of the New Energy Local Directory by the General Office of the State Council has undoubtedly become the first “harvest” led by the Ministry of Commerce to break the monopoly investigation in the regional blockade industry.

Almost at the same time, many ministries and commissions such as the National Development and Reform Commission and the Ministry of Communications are also promoting the monopoly investigation in the automotive industry.

“We are really doing it.” On July 22, the relevant person in charge of the price supervision and inspection of the National Development and Reform Commission and the Second Division of the Anti-Monopoly Bureau disclosed to this reporter that the NDRC has indeed launched an anti-monopoly investigation against the auto industry. “At the end of May and early June, the NDRC began to carry out anti-monopoly investigations in the automotive industry from Beijing to Jiangsu and then to Shanghai, and also interviewed some of the relevant person in charge of automobile companies.” Sources disclosed to this reporter. “In fact, after the Spring Festival, the National Development and Reform Commission has begun to investigate related companies in the automotive industry, not only in Jiangsu and Shanghai, but actually in more cities.” On July 23, the Auto Industry Association, who declined to be named, was responsible for this. People added to this reporter.

The aforementioned sources also revealed that the ongoing anti-monopoly investigation by the National Development and Reform Commission (NDRC) is a survey on the prices of completed vehicles and parts. “This is the investigation of the monopoly price formed by the agreement on the distribution of the sales market, the regulation of the output of the product, and the determination of the price of the goods for enterprises that have produced similar products in order to obtain high profits.” The above person explained further.

In the area of ​​automotive aftermarket, there are antitrust investigations. On June 30, the Ministry of Communications issued the Guiding Opinions on Soliciting the Transformation and Upgrading of the Automobile Maintenance Industry to Improve the Service Quality (Draft for Soliciting Opinions), and publicly soliciting opinions from the society.

Among them, breaking the monopoly of repair parts channels has become a top priority. The "opinion" also proposes a specific method of breaking the monopoly of auto repair parts - firstly, encouraging original parts to enter the independent aftermarket, that is, encouraging original parts companies to sell their parts to independent aftermarkets; second, encourage development " "Homogeneous accessories", that is, the same quality as the original accessories.

All-round multi-industry

When did many ministries co-opt fire to the anti-monopoly in the automotive sector?

"After the Third Plenary Session of the 18th CPC Central Committee, accelerating the improvement of the spirit of the modern market system, building a unified, open and competitively regulated market system, and establishing fair, open, and transparent market rules have become MOFCOM's key promotion goals, as have other ministries and commissions. Zhang Li told this reporter. “On this level, all the ministries and commissions of the country are implementing their division of work according to their own functional areas under a unified strategic plan.”

As a pillar industry of GDP in China, the anti-monopoly trend has driven the auto industry even more. At the end of last year at the annual meeting of the China Automobile Dealers Association, Lu Yanchun, deputy director of the Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission, publicly stated for the first time that “the next step is to increase the intensity of anti-monopoly investigations in the automotive industry, vehicle sales prices, after-sales service, and refusal. Three aspects of the transaction will be the focus of antitrust investigations."

Why does the auto industry have a monopoly? What kind of monopoly exists? According to many industry insiders, the “Automobile Brand Management Measures” that are intrinsically linked to the monopoly of the auto industry are, to a certain extent, the source of vertical monopoly in the automotive industry.

According to the current “Implementation Measures for Automobile Brand Sales Management”, automobile brand distributors should engage in vehicle brand sales, after-sales service, and parts supply activities within the scope authorized by automobile suppliers. “The word “authorization” has intensified the regulation of dealers by auto manufacturers, such as setting dealer resale prices, sales of good-selling models and unsalable vehicles, and sales of original spare parts and other rigorous business policies. It became natural.” Mr. Wei Shiyi, a Dacheng law firm that has long focused on the anti-monopoly field, admitted in an interview with this reporter that “Strictly speaking, auto dealers have the right to set prices independently, as long as they are not suspected of dumping at low prices. Dealers can set car prices based on their own profits and costs, but at present, most auto companies will interfere with dealer pricing, even if they are in the form of 'manufacturer guide price', but in fact, as long as the guide price category is exceeded, the car The punitive measures that companies will impose on dealers should also be monopolistic."

In reality, it is not uncommon for auto companies to limit the selling price of dealers. “It can even be called unspoken rules or ubiquitous,” said Yan Jinghui, deputy general manager of the Asian automobile trading market. “Most brands of new products will set a minimum selling price under the manufacturer’s guide price within the shelf life of new products. And this minimum price is usually strictly insurmountable."

Fortunately, the revision and improvement of the “Implementation Measures for Automobile Brand Sales Management” are ongoing. In September 2013, Shen Danyang, spokesperson of the Ministry of Commerce, disclosed that the “Implementation Measures for Automobile Brand Sales Management” was being revised. Auto dealers imposed dealer operating models, monopoly prices, illegally received deposit for building stores, and forcibly pressed warehouses and tying sales. Will be severely punished according to law.

In addition to the administrative monopoly of local regional protection barriers and the above-mentioned vertical monopolies, horizontal monopoly has also become the main monopoly form of the automobile industry. “Distribution between distributors and dealers, or between auto companies and auto companies, but they jointly negotiate on prices, etc., may constitute a kind of monopolistic behavior.” Wei Shiyi told the reporter that under the same brand Car dealerships are also in a competitive relationship. "For example, car dealers under the same brand hold monthly or annual regular meetings, and the act of jointly setting or revealing the price of the vehicle model is not allowed."

Falling dominoes

The Ministry of Commerce dominated the eradication of local blockades, the National Development and Reform Commission rectified the monopoly of the auto industry, the Ministry of Transportation of the People's Republic of China sorted out the monopoly of the auto parts supply system, and a large network of three sectors intertwined to make the entire automobile industry airtight.

Under this big net, the first domino of anti-monopoly in the auto industry has already fallen. On July 21st, the State Council explicitly requested that local protection be abolished, and all regions should implement national unified standards and industry standards for new energy vehicles and charging facilities, and implement a nationwide unified promotion catalogue for new energy vehicles.

"Reduction (new energy vehicle purchase tax) is a good one, but you want to reduce (purchase tax) first place the list of new energy sources can get it?" July 9, after the exemption from the introduction of new energy vehicle purchase tax policy, a new SAIC Energy-related people once looked forward to the abolition of local protection policies. Perhaps what he did not expect was that just over a dozen days later, a State Council’s notice had brought the end of the division and administration of the new energy vehicles.

Eliminating the trend of local protection and administrative monopoly, the next knife is expected to fall on the restricted-use policy for used cars. “In some parts of Hebei Province around Beijing, such as Shijiazhuang, Zhangjiakou, and other cities, the conditions for the entry of used cars are very strict and require that the relocated models must meet the national five emission standards. However, in fact, the local vehicles on these areas are also executed. It is only the national standard." A salesperson from the used car dealership market in Beijing told this reporter.

Luo Lei, the deputy secretary-general of the China Automobile Dealers Association, also sighed on Weibo. “More and more restrictive relocation policies across the country are quickly closing up used cars.” In fact, there are 310 cities across the country. We have set a used car relocation gate in the area. “The same goods are treated differently in different regions because of geographical differences. This is also an example of a typical administrative monopoly.” Wei Shiyi told this reporter.

For this reason, the China Automobile Dealers Association has officially submitted a report to the relevant authorities in recent days and proposed to cancel the unreasonable "relocation restriction" policy introduced by various localities. Luo Lei admits that as of now, this proposal has no substantive results.

After the auto companies' vertical monopoly of distributors and the horizontal monopoly of auto and dealer companies have been broken, the auto industry will present a brand-new situation.

"The gap between the status of auto companies and distributors can be greatly reduced, auto companies can no longer set strict business policies with distributors, pricing is gradually opening up in terms of models and after-sales services, and the auto trading market and post-market are gradually entering a state of free competition; After the horizontal monopoly was broken, the price gap between free-price pricing among the same brand dealers also made the consumer groups have wider choices and more room for comparison.” Yan Jinghui said that the process of breaking multiple monopolies one by one will also be the transformation of the auto industry. the process of.

However, policy-oriented anti-monopoly measures are not the ultimate driver. "Anti-monopoly measures cannot be achieved overnight, nor can they be successful as a temporary solution, but as a long-term, continuous process. We have not done much in market supervision before. We are now starting to intensify our efforts." As a result, the gradual and progressive anti-monopoly measures can not be completely promoted by relying solely on anti-monopoly, but will be a healthy, brand-new market circulation system created through the interweaving of markets, concepts, rewards and penalties, and many other aspects.