As one of the world's fastest growing economies with a newly emerging middle class, China now has a car market that is outpacing that in the United States. In fact, it has reached the point where many now view it as the largest market for automobiles in the world. Even though the Chinese Government has many protectionist policies in place, many exporters from the United States are taking advantage of this new demand.
The Reason Why New Cars Are Being Exported to China
Just like in the United States, despite the immense differences in culture and government, all new cars in China are only sold through dealerships that are authorized to do so. However, many of the cars that are sold in China are significantly more expensive compared to the same models that are sold in the United States. For example, a car that may retail for around $80,000 in the United States can sell for almost double that amount in China. Many of those in China are aware of this disparity and are looking for alternative methods of acquiring the same model.
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How Exporters Are Taking Advantage of This
Many in the United States, namely licensed auto wholesalers with dealer licenses, would purchase new vehicles from dealerships. Afterward, they would then fill out and gather the necessary documentation in order to export the vehicle to China. Despite the fact that they pay high import taxes, not to mention the cost of actually shipping the car to China, the final cost to the Chinese buyer is still much less than they would have paid normally.
This is a practice that is still occurring, and there are still a plethora of opportunities available for exporters to profit this way.
Will This Be Allowed to Continue?
The car dealerships in China are obviously angry at this practice and don't want to have their sales decrease because of the opportunity that exporters are taking advantage of.
One of the ways in which they are fighting back against this practice is through having the car dealerships in the United States penalized if they knowingly sell a car to one of these auto wholesalers who want to export the cars to China. The auto manufacturers who have car dealerships in the United States penalize them through threats of large fines, legal action, and limiting the number of inventories that are sent to them.
These U.S. car dealerships are now taking more measures to try and make sure that they don't sell these cars to the exporters through new paperwork and checks that have to be conducted. Furthermore, buyers are now checked against a list of exporters that are known. They also try to encourage buyers to take leases or car loans, rather than paying in cash. Though not yet as common, some even make the buyer sign an agreement that states that they aren't allowed to export the car.
How Exporters Are Getting Around This
Car exporters are now trying to get around this by finding new methods to purchase new vehicles for export purposes. One such way is through hiring people in the United States who can purchase the vehicles themselves individually. Of course, they have to have an extremely good credit history. They end up paying the individual buyers a small fee for doing so, and, of course, provide them with the full amount of money for the car purchase.
Some have even resorted to more dubious and illegal methods, such as by lying and stating that they are international diplomats or even contacting Native Americans, namely because they are able to do many things that U.S. citizens can't from a legal perspective. The Federal Bureau of Investigation has been trying to curb any illegal practices.
There are still legal ways to export cars to China, but one has to be careful to make sure that nothing is being violated!