China Parallel Import reduces the price for vehicles like the BMW X5

Bernstein Research reports that China legalized parallel imports at the end of August, which has a direct impact on large vehicles imported into the country. This will the MSRP of a 2015 BMW X5 in China significantly lower with a whopping 30 percent price cut.

Historically, the Chinese government have been pushing for more domestic producers versus importers, and premium vehicles were one item being taxed heavily when imported into the country.

Moody’s Investors Service said European automakers like BMW, Volkswagen and Audi, Mercedes and Jaguar will be the most affected by the price cuts because China is their largest market in volume terms. But at the same time, longer term the premium automakers may come ahead.

“Continued strong auto demand growth in China should offset these price cuts and could improve vehicle sales volumes in the longer term. Also, price reductions may make a new car more affordable, in turn boosting sales volumes even though they may not be sufficient to make premium models more affordable to Chinese buyers,” Moody’s said.

Import of cars on the grey market will most likely continue so lower pricing for those cars will continue to affect companies like BMW and Mercedes.

Source: Forbes