China is considering broadly easing producer-imposed restrictions on auto dealers, potentially allowing a single dealership to sell rival brands, a move that could boost car retailers’ competitiveness as the country’s economy slows.
Auto manufacturers could no longer forbid their dealers from selling cars from rival brands, according to the draft rules the Ministry of Commerce posted on its website on Wednesday for public comment.
Under the proposed rules, dealers would have to tell their customers if they haven’t obtained permission from manufacturers to sell a certain brand of cars.
The new rules would offer dealers increased protections and flexibility to operate at a time when China’s slowing economy has forced many dealers to discount heavily, even to the point of selling new cars at a loss, to stay competitive.
“The dealers are the first to cry,” a manager for one of Volkswagen AG’s China ventures told Reuters last year when sales were declining.
The Chinese economy continues to falter with a private survey showing on Monday that factory activity shrank for a 10th straight month in December.
The draft rules would protect dealers from being dumped by manufacturers, who would be required to authorise dealers for at least five years at first and for three-year periods thereafter.
Manufacturers also wouldn’t be able to set fixed sales quotas or limits on dealer inventory, unless both sides agree in the authorisation agreement. Dealers can also sell cars and parts to each other.
The rules also extend additional protections to consumers, forbidding force selling of insurance, selling above marked prices or charging excess fees.
China’s auto market is expected to have grown 3 percent in 2015, with the chief of China’s automakers association forecasting 5-7 percent growth for 2016.