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"As wealth (in China) has increased, the volume of gray market" - or illegal - "luxury vehicle exports has increased," Tim Dunne, director of global automotive operations at California market-research firm JD Power and Associates, told China Daily in an interview. "It's a big business."No it is not. Nothing illegal there. Gray market is not illegal. No crime committed. And as I understand it JD Power is where the auto industry goes to buy the opinions it wants, they are not an independent source of information.
The schemes can cause big financial problems for US dealers, who are contractually prohibited from selling new vehicles to anyone who intends to export them and can be penalized by the automakers for doing so - even if they do so unwittingly, the automotive-industry news website reported.
Dealerships that sell to exporters may be forced to pay charge-backs, have incentives revoked and receive fewer vehicles from the factory in the future, according to an article on the website. Fraudulent registrations also hurt dealerships that do not sell to exporters because such registrations understate the dealerships' actual market shares, making it appear they are falling short of sales targets, the article said. That can affect bonuses paid by automakers as well as future allocations.
Steps must be taken "to ensure that vehicles produced and equipped for the US market are sold to end consumers in the US and not operated in areas for which they were not designed or certified", she wrote.This is a problem for the buyers, not for Mercedes benz.
Automakers place restrictions on where their vehicles can be sold so they can appropriately manage their regional production and distribution plans, protect their brand reputations, manage their pricing, and protect their dealer franchisees by guaranteeing them a sales territory that other dealers are not allowed to enter."Appropriately manage" contrary to customers demands.
Traders "play by different rules with a different set of responsibilities than dealers, and dealers are prohibited by their franchise agreements from playing the trader's game," he said.
"Dealers are the face-to-face conduit between the automaker's brand and the customer, so automakers depend on their dealers to satisfy customers in order to create good will, create repeat customers for the brand, and spread word-of-mouth recommendations about the brand," the analyst said. "Many authorized dealers get financially rewarded by automakers for keeping customers satisfied."
Dunne said, "that traders don't meet the customers face-to-face, are not responsible for maintenance or repair vehicles when they need it, and are not responsible for making sure customers are happy if they have any problems with their vehicles".
At the heart of the crime is an effort to prey on the craving by Chinese for automobiles that convey that the newly wealthy buyer has reached the pinnacle.
John Kacavas, the U.S. attorney for New Hampshire, recently announced that two California men pleaded guilty to federal mail fraud charges and violations of U.S. customs laws, in what officials say was the first successful prosecution of a major vehicle-exporting operation. The defendants admitted to scheming to export 93 vehicles worth more than $5.5 million that they and others bought in 16 statesMail fraud is a crime, and falsifying export documents is a crime. You can buy and sell cars on the gray market without committing these crimes.
Auto makers say their no-export provisions are needed to ensure that cars are sold with the proper equipment and warranties for the country where they'll be driven. And they say they are entitled to set prices differently in different markets.Of course they are, but that does not mean people must not work around their price-fixing. Price fixing is usually illegal, except in the auto industry, and this is a perfect example of the free market responding to manufacturers abusing their customers.
The U.S. alleges that Erxin Zhou and Yifan Kong used money from a tire business to fund the purchase and export of 2,000 luxury cars—worth more than $80 million in the U.S.—to China last year. Their goal for this year was 3,000, according to the government's complaint. The couple hasn't been charged with a crime, but some of their company's assets were seized in October by the U.S.Of course they are not charged with a crime, because there is no crime. Now, assets may have been seized in anticipation of finding some wire fraud or customs exdec violations, but that is a different problem.
The renewed focus on illicit export practices comes amid accusations in China of automakers jacking up prices and sowing discord between dealers and auto makers. In August, China's Ministry of Commerce said it would move to change rules governing vehicle sales in the world's largest auto market. A ministry spokesman said the move could include limiting automakers' power to demand a deposit from dealers, which would give local dealers more freedom over the vehicles they sell.
This week, China's auto lobby fiercely opposed a possible move by Beijing to ease restrictions on foreign ownership in the car industry, saying that the move would seriously weaken the position of indigenous carmakers.
Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM), said that if foreign ownership rules were relaxed, Chinese carmakers would lose control of joint ventures they now own and run jointly with global automakers.
|Source Data - USITC - John Wiley Spiers Analysis|
|Source Data - USITC - John Wiley Spiers Analysis|
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