CCTV Targets Luxury Cars In New Assault

Jaguar Land Rover under attack

Just a couple of days after I wrote that a wave of summertime attacks on foreign companies appeared to be firmly in the past, Chinese media are turning up the pressure on several luxury car makers with new accusations of high prices. This kind of attack is more in line with what we’re used to seeing from Chinese media, which like to periodically criticize big western names for quality problems or high prices. That’s quite different from what we saw over the summer, when Chinese regulators launched a series of probes into western firms for illegal activities like price fixing and bribery.

This latest attack looks quite similar to previous ones that have accused foreign companies of charging more money or offering inferior after-sales service for their products in China than they do in other global markets. This time 3 foreign car makers, Jaguar Land Rover, Audi and Subaru, have come under fire in a new report from CCTV, China’s main TV broadcaster and often the source of major investigative reports. (English article)

In its reports, CCTV found that the trio of car makers not only charge more for repairs in China than other markets, but that they are also often reluctant to repair broken parts and encourage car owners to buy more expensive new parts instead. In fairness, CCTV did point out that one reason for the higher costs is China’s high import duties. Anyone who lives in China knows that such added costs mean that foreign brand cars here are often far more expensive than the same models in other parts of the world.

This particular attack looks a lot like one aired by CCTV in October, when it accused global coffee giant Starbucks (Nasdaq: SBUX) of charging higher prices in China than in other markets for comparable products. (previous post) In that instance, Starbucks wisely issued a statement saying it weighed many factors when setting prices in each market, and then stayed quiet after that. Chinese consumers later came to the company’s defense, pointing out that Starbucks operated in a highly competitive market in China and therefore should be allowed to charge whatever prices it wanted.

Another similar attack early this year saw tech giant Apple (Nasdaq: AAPL) come under fire from CCTV for offering inferior after-sales service in China compared with other markets. In that case, Apple ultimately issued a rare apology but only after suffering from extensive negative publicity. This latest assault on the 2 luxury car brands, including the highly popular Audi, looks like an extension of accusations over the summer that foreign luxury car makers were charging Chinese consumers unreasonably high prices. (previous post)

So, what do I make of all this and should the luxury car makers be worried? In this case I think the answer is probably “no”, though the car makers would be wise to follow a strategy similar to Starbucks and maintain a low profile for the next few weeks. CCTV is famous for this kind of attack, which is part of its newer role these past few years as a consumer watchdog. Such attacks often result in short-term negative publicity, but seldom end with charges of any criminal wrongdoing.

Over the longer term, I expect we’ll see this current campaign quickly fade from the headlines unless more serious allegations emerge. But that doesn’t mean the original probe over the summer against luxury car makers will go away, and CCTV will continue to mount its periodic campaigns against both foreign and big domestic brands. At the end of the day, foreign companies still need to be alert for these attacks, but should know that proper contrition and maintaining a low profile are usually the best approach in such situations.

Bottom line: A new CCTV attack against several foreign car makers for high repair costs looks like another periodic campaign against multinationals, and will probably quickly fade.

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