SHANGHAI (Bloomberg) -- The European Union Chamber of Commerce in China urged the nation's government to allow more competition for vehicle aftermarket service as current regulations are the "key driver" of the monopoly situation.
China's policies have allowed automakers to control the supply of aftermarket components. The parts are distributed only to the automakers' authorized dealership repair shops, which causes "an excessively high repair part price," the chamber's working group on auto components said in a report released Tuesday.
In April, a report by the Insurance Association of China and China Auto Maintenance & Repair Association concluded that replacing all the components of a Mercedes-Benz C-class sedan can cost 12 times the price of a new car.
Chinese antitrust regulators have investigated the auto industry for overpriced spare parts. The investigations, which led at least seven automakers to cut spare part prices, prompted the European chamber to say last month that foreign companies were being picked on.
Restrictions that limit the freedom of suppliers to sell to the independent aftermarket limit choices for consumers, the group said.
Those curbs force buyers to choose between stores controlled by vehicle manufacturers, which often charge a significant premium, or independent shops, which carry less expensive counterfeit components, according to the report.
The chamber urged China to revise the regulations to ensure "free and balanced" competition in the aftermarket.
Suppliers of original equipment should be allowed to sell components to independent repair shops at lower prices, the report said.
Lexus, Mercedes and BMW cut prices for spare parts after investigations by China's National Development and Reform Commission.
China also should lift the cap on foreign ownership in the auto industry, the European chamber's working group on the auto industry said. Foreign automakers should be allowed to hold more than the current 50 percent of joint ventures in China.
"Mandatory 50-50 partnerships are counterproductive from a management point of view," the group said. "Moreover, in a market economy, they are an anomaly."
Chinese brands will be "killed in the cradle" if the government lets foreign automakers become more independent from domestic partners, the country's main auto industry group, the China Association of Automobile Manufacturers, said in February.
Last October, a Chinese Ministry of Commerce official said automakers should prepare for the day when the foreign stake limit is relaxed.
The chamber also called for a dialogue to remove hurdles "slowing down, rather than facilitating" the Chinese government's efforts to promote new-energy vehicles. The possibility of fiscal incentives to electric cars made at joint ventures and imported models should be included in the dialogue.
The U.S. Chamber of Commerce has warned that China is losing its appeal as the top investment destination for American companies as the business environment becomes tougher.
Investments in China by foreign companies -- excluding financial firms -- fell 17 percent in July, the biggest drop in five years, according to government data. The decline had no connection with the antitrust investigations, the Ministry of Commerce said at the time.