General Motors Fined $29 Million by China for Allegedly Manipulating Prices

China has hit General Motors joint venture with a fine of 201 million yuan or $29 million for allegedly manipulating prices, said the state operated China Central Television on Friday.

Citing the authority based in Shanghai that oversees prices, the CCTV said that SAIC General Motors reached an agreement it called monopolistic with dealers, setting the floor prices for cars including its Chevrolet Trax, Buick Excelle and Cadillac SRX.

The government’s fine is equal to 4% of the sales revenue from the affected models during the previous year, said the CCTV report.

SAIC General Motors is a joint venture of 50-50 between SAIC Motor and GM. SAIC is the largest automaker in China by sales. Foreign-based automakers are required to enter a joint venture with a local company to produce vehicles in China.

In a statement emailed to the media, GM said it fully respected local regulations and laws wherever it operates. We provide full support to the joint venture we have in China to ensure all appropriate and responsive actions are taken related to the matter.

This is not the first fine issued to a foreign automaker in China over the alleged manipulative pricing behavior. The announcement’s time however arrives when China is weighing in on how it will approach the threats made by U.S. President-elect Donald Trump relative to trade.

China announced it would impose a fine last week on a carmaker from the U.S. only days after Trump questioned why the United States should continue observing a policy of “One China” unless the Beijing government was willing to make policy concessions that obstruct interests of America.

The fine of $29 million will not hurt GM. The automaker earned operating profit of more than $2.1 billion last year in China. It does not release sales revenue for China.

China for global automakers is a vitally important market, especially during a time when U.S. sales have tapered off and emerging markets such as Russia and Brazil have started contracting.

China represents 37% of the global vehicle sales of GM, 36% for Volkswagen and 17% for Ford Motor.

Over the last ten years, multinational have sunk billions of dollars into their auto dealers in China hoping to tap into the rapidly growing affluence in China.

Now pressure is being felt in the market where the economic growth has slowed, local competition has grown and authorities have become less accommodating to the foreign automakers.

Leave a Reply