Toyota Motor Corp (TYO:7203) (NYSE:TM) Cuts Prices On Lexus Parts Due To Anti-Trust Problems

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By Mark Michaels on August 22, 2014 Company, Consumer Staples

Yesterday, Toyota Motor Corp (TYO:7203) (NYSE:TM) announced that it would lower prices for its car parts for its Lexus models in China. This move is similar to that of its German competitors, who have cut their prices as well in response to the anti trust issues in the country.

According to a statement posted on the Lexus’s Chinese website, the luxury car company will cut an average of 26 percent from the price of roughly 15,000 parts next month. This drop in prices is due to the concerns raised by the National Development and Reform Commission in China regarding monopolistic practices in the auto industry. Thus Lexus stated that it will reduce the prices of its spare parts starting the 1^st of September.

The statement also said that the company will ensure that it fully complies with the laws and regulations of the Chinese government, as well as improve its own management behavior, safeguard the rights and interests of its customers, and support the auto industry in China.

Other car makers, such as BMW (ETR:BMW), Volkswagen’s Audi (OTCMKTS:VLKAY) (ETR:VOW) and Mercedes-Benz, have announced already that they would cut prices on the spare parts of their car brands in China. This is in an effort to satisfy the criticisms from regulators who have accused some of these companies of anti competitive and monopolistic behavior.

China has cracked down on an array of industries, from milk powder manufacturers to electronic firms. These firms have come under intense scrutiny in the past few years as the government in China focuses its efforts to bring foreign companies up to speed with the country’s new 2008 anti monopoly laws.

However, legal experts say that the authorities in China seem to be coming down on more foreign multinational companies than domestic companies. Chinese regulators insist that the rules and laws apply to both foreign and domestic firms, and its fundamental goal is to protect consumers.

Xinhua News Agency, a local news agency, reported earlier this month that Mercedes-Benz was discovered to be guilty of fixing prices for after sales service. The National Development and Reform Commission in China also noted that it would penalize Fiat SpA (OTCMKTS:FIATY) and Audi for engaging in monopolistic practices.

Executive members at Toyota stated earlier this month that the authorities from the Chinese government is taking an initial examination into the Lexus brand’s policies regarding auto parts.

Yesterday’s announcement about the price cut follows close behind the event that the Chinese government penalized 12 Japanese manufacturer’s of auto parts a total of 1.2 billion yuan (USD$201 million). These 12 auto makers were found guilty of manipulating prices.

China’s auto industry is the worlds largest car sector and is also dominated by foreign brands. Recently, it has been brought under the spotlight due to claims by the state’s media that foreign car and parts manufacturers are cheating and overcharging customers.