The era of buying cars from a single channel in 4S stores will be a thing of the past. The reporter learned from the Shanghai Development and Reform Commission that the Shanghai Free Trade Zone Parallel Import Automobile Trading Center is scheduled to officially open for business on February 9. This means that cars that have been in the gray zone for a long time will be imported in parallel and will be officially standardized in the Shanghai Free Trade Zone.
According to the notice issued by the Shanghai Municipal Commission of Commerce, it is in compliance with “the automobile sales business for more than 5 years, and the business performance in the last three years has been continuously profitable. In the previous fiscal year, the automobile sales exceeded RMB 400 million, and the automobile dealership was registered in the free trade zone. Qualified wholly-owned subsidiaries or holding companies as parallel import vehicle dealers and other conditions can apply for parallel import vehicle pilot business. It is understood that the current Free Trade Zone Management Committee has accepted a total of more than 10 enterprises for pilot applications.
The current "Automobile Brand Sales Management Implementation Measures" stipulates that foreign auto companies must be sold through domestic 4S stores, 4S stores can only be purchased from OEMs, and original parts must be used for maintenance. This 4S shop-led auto sales pattern is facing multiple pressures: on the one hand, it blocks other circulators from importing cars and selling cars; on the other hand, 4S stores have a serious "dependency" for car manufacturers. The latter fully controls the distribution network established by the 4S store to bear the high cost. One of the most widely criticized problems is that the current price of imported cars is much higher than the price of foreign markets.
Parallel imports bypass the main distributors, regional distributors, 4S stores, etc. Traders can buy cars directly from the origin or overseas markets, and import them into the Chinese market. The price of the same model is 4S. The store is 10% to 25% cheaper. In addition to the price advantage, after the new overseas car is listed, it may not be listed in China because of some automobile manufacturers' strategic planning and domestic certification. However, parallel imported cars have a natural advantage in this respect. After the dealers are free to purchase overseas, they are shipped to domestic sales, saving a large part of the waiting time for new cars. According to the statistics of the China Automobile Dealers Association, in 2013, the number of parallel imported cars entering China was about 83,000, accounting for 8% of the total domestic imported cars.
It is worth mentioning that parallel imported cars, formerly known as “water trucksâ€, often face problems such as dealers not providing after-sales service and insurance. In order to eliminate this phenomenon, the Shanghai Free Trade Zone sets the standard for parallel importers to be basically equivalent to imported car dealers.
However, in the view of some car dealers, these terms have pushed up the dealer's operational risks and will increase the operating costs of the company. For this reason, many dealer groups currently have a wait-and-see attitude for the application for parallel imported cars.
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