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China Poised to Relax Dealership Rules
China has proposed new rules that would reduce the control carmakers currently exercise over their dealers, Bloomberg News reports.
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China has proposed new rules that would reduce the control carmakers currently exercise over their dealers, Bloomberg News reports.
The draft regulations from the Ministry of Commerce would allow retailers to sell domestic brands without permission from the manufacturer, free factory authorized dealers from company-imposed sales quotas and enable dealers to sell service parts to each other.
The measure would require carmakers to contract with dealers for at least three years at a time compared with the current annual renewal system. Dealers also would be shielded from being forced by carmakers to sell mandatory insurance to customers.
Analysts tell Bloomberg the proposed changes would likely reduce profits for foreign car brands doing business in China. Currently, they say, wholesale vehicle prices to dealers usually are higher than retail prices.
If the new rules are adopted, they also may force consolidation among the more than 26,000 dealers currently operating in China, suggests research firm Sanford C. Bernstein.
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