AutoBeta(AutoBeta.net)06/07 Report--

Changan Ford was fined 163 million yuan by the State Administration of Market Supervision and Administration for monopolistic behavior, becoming the first fine for the automobile industry in 2019. In response to this matter, Changan Ford issued an official statement saying that it respects and implements the punishment decision made by the relevant state departments in the anti-monopoly investigation. Changan Automobile, a shareholder of Dongfang, issued a notice saying that the punishment had little impact on the company.

Changan Automobile issued a notice saying that after verification, the administrative penalty did not have a significant impact on the production and operation activities of the company (including Changan Ford). Since Changan Ford has withheld the risk cost that may be caused by the above actions in 2018 in accordance with the normative requirements of the national regulatory authorities, this penalty has no significant financial impact on Changan Ford and Changan Automobile in 2019.

On June 5, the State Administration of Market Supervision issued a penalty notice on Changan Ford Motor Company, which made a penalty decision on the vertical monopoly agreement implemented by Changan Ford Motor Company in accordance with the law and fined 162.8 million yuan. The General Administration of Supervision believes that Changan Ford has deprived dealers of pricing autonomy.

According to the announcement, Changan Ford has limited the minimum resale price of downstream dealers in Chongqing since 2013 by formulating a "price list", signing a "price self-discipline agreement" and restricting downstream dealers' minimum prices and online minimum quotations during the auto show, in violation of the provisions of the Anti-Monopoly Law prohibiting operators from reaching a monopoly agreement with their counterparties to resell goods to a third party. In the course of the investigation, Changan Ford did not provide evidence to prove that the relevant actions were in line with the exemption under Article 15 of the Anti-monopoly Law. The above behavior of Changan Ford deprives the downstream dealers of pricing autonomy, excludes and limits the competition within the brand, actually weakens the competition among brands, and harms the fair competition in the relevant markets and the legitimate interests of consumers. According to the Anti-monopoly Law, the General Administration of Market Supervision fined Changan Ford 4% of its sales in Chongqing in the previous year.

The penalty of 163 million yuan is undoubtedly even worse for Changan Ford's deteriorating market performance. In 2018, Changan Ford's annual car sales fell by 54.3 per cent to just 377800. From January to April this year, Changan Ford sold 51597 vehicles, down 69.3% from a year earlier.

Changan Ford contributed more than 80 per cent of Changan's profits in 2016 and 2017, reaching 9.029 billion yuan and 6.039 billion yuan respectively. But in 2018, Changan Ford lost 331 million yuan.

The sharp decline in the performance of Changan Ford also caused Changan Motor to fall into a loss. In the first quarter of 2019, Changan Automobile lost 2.096 billion yuan in net profit belonging to shareholders of listed companies.

Changan Ford has sought a solution to reverse the decline of the Chinese market. After a series of adjustments, Ford China has replaced more local senior executives and accelerated the introduction of new products to adapt to the fast-changing market.

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