China’s Latest Price Fixing Target

Reuters Newswires, August 18, 2014

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China finds Mercedes-Benz guilty of price fixing

Reuters Newswires, August 18, 2014

Germany's Mercedes-Benz has been found guilty of manipulating prices for after-sales services in China, the official Xinhua news agency reported, adding to pressure on foreign carmakers in the world's largest auto market.

The report by the official Xinhua news agency made no mention of possible penalties, but China's 2008 anti-monopoly law allows the country's anti-trust regulator to impose fines of up to 10 percent of a company's China revenues for the previous year.

The Jiangsu Province Price Bureau, which launched an investigation last month, found evidence of anti-competitive practices after raiding Mercedes-Benz dealerships in the eastern coastal province and an office in neighboring Shanghai, Xinhua said.

The dealership in the same building as the Shanghai office which was raided appeared to be operating as normal on Monday (August 18), with potential customers peering at shiny new cars.

A Daimler spokesman repeated a statement, first made by Mercedes-Benz on August 5, that it was assisting the authorities with their investigation, adding that it was unable to comment further as it was still an on-going matter.

The Xinhua report said the cost of replacing all the spare parts in a Mercedes-Benz C-Class could be 12 times more than buying a new vehicle, citing a report from the China Automotive Maintenance and Repair Trade Association.

Managing director of Gao Feng advisory firm, Bill Russo, said the consumer would benefit.

"So I think what we are seeing is, first of all, a communication to the market that over the years, foreign branded products have been priced very high and informing the Chinese consumer that perhaps they should take another look at the prices and look for a more competitive price from the…and demand a more competitive price from the manufacturer. So in the end, this is actually a good thing for the consumer," he said.

An array of industries, from milk powder makers to electronics firms, have been coming under the spotlight in recent years as China intensifies its efforts to bring companies into compliance with the 2008 legislation.

The auto industry has been under particular scrutiny, with a wave of investigations prompting carmakers such as Mercedes-Benz, owned by Daimler, Volkswagen AG's Audi, and BMW to slash prices on spare parts in recent weeks.

"So by enforcing these laws, they are actually making the foreign branded products more affordable to the market, which in the end is going to make harder for Chinese branded car makers to compete against them. So the unintended consequence is that you're giving the consumers a better price but you are also forcing the local car makers to compete with foreign branded products that are more affordable," Russo added.

Early this month authorities said they would punish Audi and Fiat SpA's Chrysler for monopoly practices.

Chinese media reported last week that Audi, the best selling foreign premium car brand in China, would be fined around 250 million yuan ($40.7 million).

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Bill Russo to Join Panel Discussion at China Automotive Pudong Summit

Shanghai, China, August 13, 2014

TOPIC:

Trade and investment reform in CSPFTZ and its link with the enhancement of competitive edge of China’s auto industry

As we all know, the supply chain of the automotive industry centers on auto manufacturers. In the context of trade facilitation in CSPFTZ, how can we coordinate development of the auto supply chain to improve the competitiveness of the entire supply chain and to achieve win-win development? Along with China’s auto industry rapid growth, a “going global” strategy has been promoted since the beginning of the century. How to further promote the going global initiatives of the industry, so as to improve its international influence and enhance the level of recognition?

• How to develop the auto supply chain in a coordinated way to improve the competitiveness of the entire supply chain and to achieve win-win?
• Challenges and difficulties that China’s automakers are faced with 
• In the context of CSPFTZ trade facilitation, how can domestic suppliers improve technological competitiveness and go global?
•  Discussions on the new going-global models and strategies of Chinese automotive enterprises. How to establish a going-global risk management mechanism?

Panelists

Zhou Biren, Deputy General Manager of Chery Automobile Corporation & General Manager of Chery International Corporation, China

Jay Jiang, Vice President, Corporate Communications, Bosch (China) Investment Ltd., China

Bill Russo, Managing Director, Gao Feng Advisory Company, China

Experts from related research institutions and universities

Moderator

Liu Xiaoyong, Deputy Director, General Affairs Office, CCPIT Automotive Sub-Council  & Editor-in-Chief, Automotive Observer, China 

CCTV Dialogue: Foreign Firms Under Scrutiny

China Central Television, August 7, 2014

Dialogue 08/07/2014 Foreign firms under scrutiny

Host: Yang Rui

Yang Rui

Studio Guests:

Dr. Liu Ke, Vice president of Shenhua Research

Bill Russo, managing director of Gao Feng Advisory Company

Tesla's Expansion in China Gets a Local Assist

The Wall Street Journal, July 16, 2014

Electric-Car Enthusiast Built His Own Charging Network Between Beijing and Guangzhou

Zong Yi, left, next to one of his charging stations. Xu Lei, right, donated a parking spot to place Mr. Zong's charging pillar. Photo: Phnix

SHANGHAI—Zong Yi, a Chinese businessman with asthma and worries about his country's pollution problems, happily took delivery of his new electric Tesla Model S sedan in May.

His problem: How to get it home.

Mr. Zong lives in the southern Chinese boomtown of Guangzhou, where he founded a business that makes energy-efficient equipment like water heaters for swimming pools. In April, Tesla Motors Inc. delivered its first cars to customers in China in Beijing, about 1,300 miles to the north. Tesla doesn't operate enough charging facilities between the cities to allow him to drive his car home.

Undaunted, Mr. Zong decided to build his own charging network. With the help of partners found online, he bought 20 charging pillars from Tesla for 5,000 yuan (about $800) each and put them in 16 cities along the way.

"I thought it would be cool if I could build China's first electric-car-charging road," said Mr. Zong, who completed the installations last month. A Tesla spokeswoman said the company is aware of, and approves of, Mr. Zong's ambitions.

Mr. Zong's do-it-yourself approach illustrates a major challenge faced by Tesla and other electric-car makers targeting China.

China's government wants 500,000 gasoline-electric hybrid and all-electric vehicles on its roads by next year and five million by 2020 as part of its effort to improve air quality and reduce oil dependence. But only about 17,600 such vehicles were purchased in China last year, according to the China Association of Automobile Manufacturers, including 14,604 electric vehicles. About 18 million passenger cars were sold in the country last year.

Lack of infrastructure is one major reason. China had hoped to have 400,000 charging pillars for electric vehicles in place by next year, but work is behind schedule. State Grid Corp. of China, China's largest power generator by sales, had finished completion of 400 charging stations as of the end of 2013, according to data from the company.

Cost is another issue, said Bill Russo, president of automotive consulting firm Synergistics Ltd., who says many electric cars in China are unaffordable there. In China, Tesla sells its Model S for $121,000. "People who buy Teslas are just showing off," he said.

Tesla has worked hard to keep its rollout smooth. As of Wednesday it had 72 charging stations in 17 different cities, according to spokeswoman Peggy Yang. The company is working with property developers to install chargers for residents.

Still, the lack of infrastructure has caused hitches. In April Tesla said it would delay deliveries to some customers because it worried that they didn't have access to charging stations or to technical support. The frustration led one customer to publicly smash his Tesla's windshield when it was delivered. A video of the incident circulated online.Chief Executive Elon Musk has apologized to customers and said Tesla is working to provide services in more areas.

Others are rolling out charging stations and other support facilities including BMW AG, which plans to set up 50 charging stations in Shanghai with local partners as part of a broader future rollout. Earlier this year, a joint venture between China's BYD Co. and Germany's Daimler AG that makes the Denza electric car agreed to tap Switzerland's ABB Ltd. to supply home chargers in the China market.

Mr. Zong, 44 years old, is a car aficionado who attributes his environmental consciousness partly to concern for his own health. "When I travel abroad, my asthma subsides. But when I return to China, the coughing and sneezing return," he said.

But he's also eager to build his green credentials to boost his business. "My company produces environmentally friendly products. Activities such as donating chargers will help" its image. In addition to Tesla, he also owns a Qin, a plug-in hybrid made by BYD Co.

To start his network, he posted notices on popular social-networking services seeking partners. "I hope to tell people that it might take a much shorter time to build a charging network across China as long as there are more and more participants," said Mr. Zong.

To make the charging pillars accessible to more consumers, Mr. Zong didn't choose a direct route between Beijing and Guangzhou. He stretched the journey out to nearly 5,750 kilometers, or about 3,600 miles (from Beijing to Guangzhou), and modified the charging facilities to accommodate other electric cars such as those built by BYD. His trip ran from May 28 to June 18.

The charging posts are scattered every 300 kilometers, and more than half of them are placed at or close to four-star hotels. "These hotels have spacious parking lots, sufficient electricity power and can offer 24/7 services. That's attractive to electric car drivers," said Mr. Zong. Tesla now lists some of the sites on its website.

The business is attractive to hotel operators because drivers need meals and places to rest, he said, adding a full charge for a Tesla Model S at one of the stations takes seven to eight hours.

In addition to building the charging spots, Mr. Zong also ordered another 20 Tesla Model S vehicles as an incentive for his senior management. "If I give them one million yuan, some might take the money and buy cars with great horsepower. That's not in line with the environmentally friendly image I'm building for my company," he said.

—Rose Yu and Colum Murphy

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GM Chases China Sales With Camaro Transformers

Bloomberg News, June 27, 2014

Visitors take pictures with the Bumblebee Autobot character from the Transformers movies at the Universal Studios Hollywood theme park in Hollywood. GM’s relationship with Transformers goes back to the first film in 2007, which included Bumblebee, a bright yellow Chevrolet Camaro.

As “Transformers: Age of Extinction” opens in theaters, General Motors Co. (GM) is betting on the latest installment of the alien-robot saga to help jump-start Chevrolet sales in China.

The reboot of the movie franchise, which features battling robots that convert into cars and trucks, opens in China and the U.S. today and includes vehicles such as the Chevrolet Camaro sports car and Trax small sport-utility vehicle. The fourth movie in the series gives GM, second to Volkswagen AG in sales among foreign automakers in China, a marketing tool as it introduces six Chevrolets in the country this year.

The goal “is to use it as a springboard for launching new products,” Tim Mahoney, the global chief marketing officer for the Chevrolet brand, said last week in an interview.

The brand could use a boost in China. Chevrolet last year failed to keep pace with the nation’s 16 percent growth for passenger vehicles, with sales rising 8.5 percent to 652,077. Transformers has melded the summer popcorn spectacle with U.S. car culture in a way that has resonated in China, where its middle class has been fueling the world’s largest auto market.

GM’s relationship with Transformers goes back to the first film in 2007, which included a bright yellow Chevrolet Camaro called Bumblebee. Mahoney said he’s seen the effect of the movie on the streets of China, where more than 70 percent of Camaro sports cars are purchased in the same color as the character. In the U.S., it’s just 5 percent.

“The yellow is pretty well associated with Chevy and I think a lot of it, I can’t prove it, but I suspect a lot of it has to do with the role Bumblebee played,” he said.

China Exposure

GM, based in Detroit, plans to use Chevrolet to expand into China’s smaller cities and the country’s western region. The brand’s slower growth last year came “from not having the freshest product in the highest growth segments,” Bill Russo, president of Synergistics Ltd., a Shanghai-based consulting firm, said in an e-mail.

Cristi Vazquez, a GM spokeswoman, declined to say how much GM spent to be part of the movie.

The favorable exposure in the Asian nation could be a boon for GM as the automaker plays defense in the U.S. over its handling of a recall of 2.59 million small cars with ignition issues linked to at least 13 deaths.

Ed Welburn, GM’s head of design, said he’s noticed the Transformer logo on Chevys while riding through Shanghai.

Bumblebee Yellow

“You know it didn’t come through the factory that way,” Welburn said. “People added it to their Chevrolets, and it’s a very positive relationship.”

GM is betting that the latest film, which features a cast led by Mark Wahlberg, will have a similar impact in China. The first three pictures in the franchise have generated $2.67 billion worldwide for Viacom Inc.’s Paramount Pictures, according to Box Office Mojo.

The last installment, “Transformers: Dark of the Moon,” was released in 2011 and had the second-biggest opening weekend for a U.S. film in China, pulling in $56 million, and ending with total sales of $165 million.

The number of theater screens in China tripled from 2008 to 2012, reaching 13,118, according to Beijing-based EntGroup, a research firm. Box-office receipts climbed 36 percent from 2011 to 2012 to reach $2.7 billion and surged to $3.6 billion last year, data from Rentrak show.

Chinese Cast

“Transformers 4 is going to be a very important film for the relationship between Hollywood and China,” said Phil Contrino, chief analyst at BoxOffice.com. “Paramount has cast Chinese actors in the film so there is a lot of outreach to Chinese viewers to make sure that it’s not just selling a film into China.”

Welburn, the design chief, worked closely with the filmmakers and has a cameo role in the movie. A GM plant was also used as a set, according to LeeAnne Stables, president of Paramount consumer products and executive of worldwide marketing partnerships.

The relationship saw GM push to get its new Trax SUV, which went on sale in China this year, in the movie along with the Sonic small car. The Trax is an important introduction for GM in China, where the brand has fallen behind in the small SUV segment.

The automaker and its joint-venture partners reported overall sales gains of 11 percent to 3.16 million in China last year. GM sold 809,918 Buicks in China in 2013 while its Wuling truck brand delivered 1.48 million vehicles domestically.

Guangzhou Auto

GM isn’t the only automaker counting on the Transformers movie.

Guangzhou Automobile Group Co., whose Trumpchi GA5 sedan is driven by actress Li Bingbing in the film, plans to export the Chinese brand to the U.S. as early as next year.

“Our sponsorship of Transformers 4 will help more overseas dealers and consumers know about our cars and over the long run it will greatly contribute to our branding,” Wu Song, head of the Trumpchi brand, said in a phone interview yesterday. “We want to start exporting to the U.S. as quickly as possible and I am confident that they will find our Trumpchi cars competitive.”

China has become the first country to reach more than 20 million new vehicle sales in one year with deliveries rising 14 percent to 21.98 million in 2013. Sales may exceed 24 million in 2014, the state-backed China Association of Automobile Manufacturers has said.

Last year’s sales of passenger vehicles, excluding buses and commercial trucks, climbed to 17.93 million -- or 15 percent more than the U.S. auto industry -- and may increase 9 percent to 11 percent this year, the association said.

As GM works to build Chevy in China, the latest movie arrives with not only cast members from China but also some filming done in Hong Kong as Hollywood also tries to capture a growing market.

Back in Detroit, Welburn, the design chief, said he believes the Camaro’s success in the movie is simple.

“The Camaro is kind of an everyday hero, and it plays that part in the movie.”

To contact the reporters on this story: John Irwin in Southfield, Michigan at jirwin25@bloomberg.net; Anousha Sakoui in London at asakoui@bloomberg.net; Tim Higgins in Detroit at thiggins21@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Chua Kong Ho

http://www.bloomberg.com/news/2014-06-26/gm-chases-china-sales-with-camaros-turning-robot-in-transformers.html

Real-Life Batmobile Found in Fantasy Junkyard

Bloomberg TV, June 20, 2014

Hollywood came to Hong Kong on Thursday with the world premiere of Transformers: Age of Extinction and they've been spotted in Shanghai as well, along with a string of superheroes including Batman.  Our own caped crusader Stephen Engle has the story. (Source: Bloomberg)

Bill "The Joker" Russo comments begin at 0:23:

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