China Government Raids Automakers – Daimler AG (ETR:DAI)

Daimler AG (ETR:DAI) announced that they are planning to cut the prices of replacement components in the next month. A day after this announcement, the company’s Mercedes-Benz office, Shanghai, was raided by investigators from the government. The investigation was a part of the anti-monopoly probe. Senol Bayrak, spokesperson for the company, said that the company is fully aiding the government in their investigation. He refused to give any further comments to the media.

In July, some people who are familiar with the government probes, said that the National Development and Reform Commission of China is investigating the practices of Mercedes, Audi, Bayerische Motoren Werke AG and some Japanese automakers to check if they are increasing prices of spare parts. In the last month, Audi claimed to have cut the prices of spare components by 38% while yesterday Mercedes declared that it will reduce the prices by 15% by September. Han Weiqi, an analyst in Shanghai, said that the government raid for Mercedes is quite confusing to occur a day after the announcement. It is possible that the company has not reduced the prices as per expectations of the authorities.

Yesterday, nine officials from the National Development and Reform Commission’s anti-monopoly department paid an unannounced visit to the Mercedes office. They investigated the practices and questioned the staff.

Mercedes is the world’s third-largest luxury automaker. The company has decided that it will take an initiative to reduce the prices of over 10,000 components by the first of September. This was in response to the government raid. Daimler AG (ETR:DAI) said that this reduction in prices will prove that Mercedes is still a competitor in the services of after-sales. However, Daimler AG (ETR:DAI)’s shares dropped by 1.9% to 60.03 euros. Xu Kunlin, the director of anti-monoply department of NDRC China, said that after the Chinese officials paid a visit to the companies, some of the carmakers considerably reduced the prices of spare parts in a report on 29 July. He refused to name the monopolies though.

China Radio announced today that NDRC Shanghai discovered Fiat’s Chrysler in Shanghai and Audi to be engaged in practices that suggest monopolization and that the companies will be duly punished for this. Meanwhile, in response to a probe, Chrysler said that the company has cut the prices of 145 parts by 20%. It has also reduced the cost of two of its jeep utility vehicles. The company said that this cut is completely voluntary and that it shows the company’s commitment to its position in the market as a competitive opponent.

Turin, which is Fiat in Italy, and currently undergoing a merger with Chrysler, also fell in the market. The shares dropped by 7.2% and were trading at 6.75 euros this afternoon in Milan. NRDC sent probes to BMW and Tata Motors as well. Both of these companies faced a loss in share prices. The Chinese government have a taken a good step to identify monopolies in the market, however, all the companies seem to have reduces their prices and yet, met with losses in the mart.