Could China's crackdown on perceived price gouging by foreign automakers trigger a domino effect next door in South Korea, where sale of overseas brands are heating up?
Authorities there are already getting tough on the pricing of auto parts. And public opinion in Korea apparently supports China's ongoing probe and favors sterner measures at home.
Pressure on foreign brands in South Korea could dent profits or sales, just as global brands are making inroads into what was one of the world’s most closed auto markets. It could be particularly tough on German brands, which account for biggest chunk of surging foreign sales.
Earlier this month, South Korea’s Ministry of Land, Infrastructure and Transport jettisoned the country’s self-certification process for automotive parts. Instead, regulators now require manufacturers and retailers to disclose prices of their auto parts online, local media reports said.
The move targets Korean brands, such as Hyundai and Kia, as well as international ones, but the timing hardly seems coincidental. Companies not complying can be fined, Korea Bizwire said.
A separate online news outlet, BusinessKorea, quoted a ministry official as saying: “If prices of automobile components are open to the public, consumers’ right to know is protected, and the transparency of the automobile component prices are enhanced.”
In neighboring China this month, authorities have said they will fine Mercedes-Benz, Audi and Chrysler for monopoly practices or price manipulation, particularly in relation to spare parts and service. Meanwhile, the nation is investigating other automakers, including Jaguar Land Rover, BMW, Toyota, Honda and General Motors. Curiously, as of Aug. 13, neither Hyundai nor Kia had been visited by the Chinese authorities leading the probe, South Korea’s Yonhap News Agency said.
In Korea, there even seems to be support for China’s actions.
After China’s fines, Korean Internet users were not only talking up the crackdown, they were slamming their own government’s stance as too lenient, according to Korea Bizwire, which cited a study by Kobiz Media, which tracks news and comment patterns in the local media.
Korean discontent with the cost of foreign brands is rising along with their price tags.
Korea Bizwire cited bitterness with recent price hikes by such overseas luxury brands as Chanel, Hermes, Gucci and Dior, and even faulted the cost of a cup of coffee at Starbucks.
To be sure, foreign carmakers have been in the sights of South Korean antitrust authorities.
Just last year, four German automakers were raided by South Korea's Fair Trade Commission on suspicion of price fixing and collusion, the importers' association said. The authorities hit BMW, Mercedes, Audi and Volkswagen just a month after the combined market share for non-Korean automakers topped 10 percent for the first time, following recent free-trade pacts.
It is hard not to see such probes, in China and Korea, as knee-jerk reactions to the rapid conquest of domestic market share by foreign manufacturers. Overseas brands in both countries are well advised to watch closely to see how much deeper the backlash bites.