Parallel Imported Auto Market Cools Down

On January 7， the paral- lel imported car pilot program， portrayed as Shanghai’s efforts toward a fairer， more market-oriented imported car market， kicked off in the city’s Free Trade Zone （FTZ）.

In the FTZ， it only costs 730，000 yuan to buy a BWM X6， which is sold at a price of more than 900，000 in a BWM 4S store. However， with such an attractive price， highly-anticipated parallel imported cars unexpectedly fail to win the favor of consumers.

On the day when the parallel imported auto exhibition center debuted in the Shanghai FTZ， only four units of parallel imported cars were sold on site， highlighting a slack market.

So， what causes the thin trade in the cost-efficient parallel imported cars？

Price Advantages Markedly Diminished Due to Discounts of Imported Autos

“China’s imported car market got off to a bad start in 2015，” says Wang Cun， deputy director at the Information Department of Imported Automobile Committee of the CADA.

On the other side， in contrast to the sharp declines in both demand and supply， the inventory of imported automobiles has shot through the roof.

In a bid to alleviate the overwhelming inventory pressure， authorized dealers decided to sell their imported cars at a sharp discount last year. In such a case， the price advantage of parallel imported cars is largely diminished.

For instance， price spreads of Toyota Prado 2700 and BWM X5 xDrive35i， the top two best-selling imported cars， both significantly narrow.

According to Wang， with the price spreads narrowing， imported cars’ advantages in warranty and maintenance are standing out， putting an overwhelming pressure on parallel imported dealers.

Shortcomings in Warranty and After-sales Services

Besides， industry insiders are questioning whether parallel imported auto market is able to adapt itself to the Chinese environment.

Except for acquiring the China Compulsory Certificate （CCC）， authorized imported cars also boasts thorough after-sales services， dwarfing the parallel imported cars whose incomplete after-sales services have always plagued owners.

To relieve potential buyers’ anxieties about their parallel imported cars， pilot enterprises and dealers registered in the FTZ are required to fulfill their obligations inclusive of product recalls， quality assurance， after-sales services and “three guarantees”， as well as the average fuel consumption accounting， in accordance with the law.

It is noteworthy that most of parallel imported auto after-sales services for consumers are provided through insurance contracts. To be specific， parallel imported car dealers offer customers the three-guarantee insurance as a counterpart to authorized imported cars’after-sales three guarantees.

However， the three-guarantee insurance is a free-choice service for parallel imported car buyers， which is eventually counted into the buying costs. In a word， it virtually increases the consumers’ costs.

Besides， parallel imported car dealers have been at pains to emphasize insurers’ functions in the auto after-sales services， passing relevant responsibilities to the third-party maintenance platform built in the FTZ.

In the worse cases， a few of parallel imported car dealers either do not offer after-sales services at all unless consumers ask， or just provide some simple auto after-sales service. Even if the guarantees and insurances are available， consumers should have to pay a high cost and perhaps face the prospect of a long-drawn-out maintenance cycle.

Since last year， all walks of life have been racking their brains for solutions to three guarantees and after-sales service problems of parallel imported cars.

A luxury brand executive reminds consumers to be wary of the specialties of parallel imports， as well as those specialties’ influence on the car use in daily life. At the same time， consumers should well prepare themselves for the subsequent service in advance.

Wang believes that in the long run， the introduction of parallel import cars will break the dealers’ authorization and record system and open up a new channel for the imported cars sales， making market competition more open and prices of imported cars more reasonable.

“In the short run， however， as parallel imported car dealers and enterprises in the FTZ still have many thresholds to cross， there will not be big changes occurring in the market，” he adds.