Lexus Fined for Price-Fixing in China

[Joaquin Ruhi]

DECEMBER 27, 2019
China fines Toyota 87.6 million yuan over Lexus price-fixing
by Yilei Sun and Norihiko Shirouzu - Reuters

China’s market regulator on Friday has fined Japanese carmaker Toyota Motor 87.6 million yuan ($12.5 million) for price-fixing on its premium Lexus cars in eastern Jiangsu province, according to a document on its website.

The decision comes as China steps up regulation over auto sales in the world’s biggest vehicle market, where more than 28 million cars were sold last year.

The anti-monopoly bureau of State Administration for Market Regulation said that between 2015 and 2018, the Japanese carmaker set a minimum sales and resale price for its cars in coastal Jiangsu province, which deprived dealers of pricing autonomy and harmed customers’ rights.

Lexus also fixed sales strategies in the region over the period, including offering customers discounts while asking them to purchase accessories at fixed prices, a sales tactic usual among individual auto dealers in China but frowned upon for carmakers.

A spokesman at Toyota, Lexus’ parent firm, told Reuters the firm acknowledged the penalty and respects the decision. He did not comment further.

China’s auto sales are declining, but Lexus’ sales keep growing. It sold 180,200 vehicles in the first 11 months this year, a 21% jump from a year earlier.

In June, China’s market regulator imposed an 162.8 million yuan fine on Ford Motor Co’s joint venture with Changan Automobile Group for violating anti-monopoly law.

($1 = 6.9927 Chinese yuan renminbi)

https://www.reuters.com/article/us-toyota-china-idUSKBN1YV171

 

[shizhi]

Relevant documents from Chinese government websites…
Lexus has achieved a higher transaction price in China, but the main reason is that demand exceeds supply. Although he can control his own price, he cannot control the competition of other brands. The reason for its high price is still a supply problem. Also due to supply issues, Lexus has slowed its pace of growth in China. The sales target for next year is 210,000, an increase of only 5% ...

 

[ssun30]

I am a Lexus supporter but their anti-consumer practices in China have greatly damaged my view of the brand this year. Other issues with the company are trivial compared to this. I understand their price-fixing is due to constant supply shortages, but they should have clamped down unrestricted markup much more harshly.

I am glad that Zhongsheng Lexus of Dalian has not charged markups for ES and UX orders. I know their manager well and he has been working for the dealership since Lexus entered China. He has great connections and his team has overperformed every year. Therefore they get priority delivery on products in short supply. I am one of the lucky people to buy such a hot vehicle in demand at MSRP. Sucks that in other provinces customers are treated so poorly.

It's about time the Chinese government start regulating automobile prices. Unrestricted markups has become really unhealthy in the past few years.

 

[zeusus]

It's about time the Chinese government start regulating automobile prices. Unrestricted markups has become really unhealthy in the past few years.

As a seller, you should sell your product for as much as somebody is willing to pay for it.

As a buyer, you should pay as little as you can for the product you want.

Supply and demand is the true fixer of prices. If a seller disrupts that flow and sells something for a price the buyer cannot bear, the market will react accordingly. The natural flow on the exchange of goods does not need any government regulation.


Perhaps we're not getting the full story from the article but the examples provided doesn't seem all that extreme to me. Yes its true, the dealer should get to set the prices but I don't see how corporate setting prices is considered price fixing while dealers setting their own prices is not?

The anti-monopoly bureau of State Administration for Market Regulation said that between 2015 and 2018, the Japanese carmaker set a minimum sales and resale price for its cars in coastal Jiangsu province, which deprived dealers of pricing autonomy and harmed customers’ rights.

Lexus also fixed sales strategies in the region over the period, including offering customers discounts while asking them to purchase accessories at fixed prices, a sales tactic usual among individual auto dealers in China but frowned upon for carmakers.

 

[spwolf]

What article alleges - Lexus setting minimum price of its cars and @ssun30 talks about - Lexus dealers marking up cars, are two different things.

Even in EU, Corporate is not really allowed to have mandatory pricing on cars - and it is usually done to disallow competition between dealers close to each other, for instance customer going to 2 dealers and starting a price war. You would get fined for this in EU too, and all manufacturers were trying to do it at some point in time.

 

[mmcartalk]

By Toyota standards, a 12M penalty is not much. But the fact that they didn't contest the penalty suggests to me that they got caught with their pants down.....even in a country that doesn't always play the economic game by fair rules.

 

[krew]

Toyota has been fined 87.6 million yuan ($12.5 million USD) by the Chinese government for price-fixing Lexus vehicles in the eastern Jiangsu province — from Reuters:

The anti-monopoly bureau of State Administration for Market Regulation said that between 2015 and 2018, the Japanese carmaker set a minimum sales and resale price for its cars in coastal Jiangsu province, which deprived dealers of pricing autonomy and harmed customers’ rights.
Lexus also fixed sales strategies in the region over the period, including offering customers discounts while asking them to purchase accessories at fixed prices, a sales tactic usual among individual auto dealers in China but frowned upon for carmakers.

Lexus is one of the few vehicle brands in China to see a sales...

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