As the Chinese government turns up the pressure on Western luxury auto brands with investigations of their high China prices, Mercedes-Benz maker Daimler is the latest car company to announce that it will cut prices. A new Wall Street Journal video interview with the newspaper’s Shanghai correspondent Colum Murphy discusses the government’s scrutiny of the China price inflation of foreign luxury goods and how brands are responding.
Daimler’s announcement of price cuts to spare parts comes a week after Audi and Jaguar have made similar announcements as a result of an investigation into foreign auto brands by the country’s economic planning agency, the National Development and Reform Commission (NDRC). The cuts are expected to take effect on September 1.
According to Murphy, the agency has been unhappy with the price inflation of luxury items in China. “In the case of Jaguar, that’s for the actual cars themselves. But in the case of Daimler and Audi, it’s for the auto parts,” he says. He adds that all three companies have issued statements in the past 10 days talking about NDRC’s greater focus on them.
While it is uncertain if there’s any political motivation behind NDRC’s investigation, Murphy says that the agency has said its aim is to protect Chinese consumers. He offers that this may be the central government’s way of forcing foreign automakers to shift production into China. However, Murphy says that there is no clear advantage to such a move in the short run as there are no major Chinese players in the luxury car market yet.