General Motors Company 's GM main joint venture in China, Shanghai GM, is being charged with a fine of 201 million yuan or $29 million for monopolistic pricing behavior. Shanghai GM - a 50-50 joint venture between General Motors and state-owned Shanghai Automotive Industries Corp. - enforced minimum dealer sales price for Cadillac SRX, Chevrolet Trax and Buick Excelle models in order to counter competition.
This monopolistic behavior suppresses healthy market competition. Meanwhile, Chinese regulators are particular about the pricing of products and services in the economy. So far, the regulators have charged many companies in sectors ranging from diary to medical devices under the 2008 anti-monopoly law.
Setting of minimum retail prices is commonly practiced in many markets. However, Chinese regulators consider this improper. Thus, regulators charged a penalty equivalent to 4% of Shanghai GM's annual sales. Chinese regulators announced this fine just after Mr. Trump questioned about One China policy.
Notably, foreign automakers form joint ventures with local companies in order to manufacture vehicles in China. General Motors will support its joint venture in abiding by the law and regulation.
China is a major market for global automakers. Around 37% of the global vehicle sales of General Motors are generated in China.
GENERAL MOTORS Price
General Motors has outperformed the Zacks categorized Auto Manufacturers-Domestic industry this year. Share price of the company increased 4.94% so far this year, while the industry saw a 2.85% increase. The company benefitted from the strong results last quarter and business initiatives including the expansion of Maven and investment in facilities. Expectations of higher earnings in 2016 also buoy optimism.
Zacks Rank & Key Picks
General Motors currently carries a Zacks Rank #3 (Hold).
America's Car-Mart has a long-term growth rate of 45.50%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Allison Transmission and Rush Enterprises carry a Zacks Rank #2 (Buy). Allison Transmission has a long-term growth rate of 11%. Rush Enterprises has a long-term expected growth rate of 15%.
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