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China launches pilot ‘parallel imports’ for foreign cars

China will allow selected dealers registered in Shanghai’s free trade zone to import and sell cars without the consent of foreign carmakers, according to an official notice.

Analysts say the move could weaken carmakers’ control over prices although foreign luxury carmakers, including Daimler, BMW and Audi, have previously said the practice would have little impact on their businesses in China.

The launch of the pilot program to allow so-called “parallel imports” of cars had been widely anticipated and analysts have said the move could put downward pressure on certain models, especially those in the premium segment.

The Shanghai Municipal Commission of Commerce said in a notice posted on its website on Wednesday that dealers registered in the free trade zone with at least five years of operation history and three consecutive years of profit can apply for the program. The cars can be sold throughout the country.

Parallel imports are common in developed countries but often with heavy restrictions, such as limiting them to direct purchases by individuals.

Gray market goods have long existed in China. Such products, which are genuine but sold at unauthorized re-sellers, are often cheaper than those bought at authorized shops but come with little or no after-sales service or quality guarantee.

According to newly published rules, dealers joining the program will be responsible for quality and after-sales service of the imported cars they sell.