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Government targets BMWs being shipped to China for lucrative profit

Federal prosecutors turning their attention to luxury car flippers

BMW is known for representing a luxury car brand meant for an exclusive group of drivers who live a high-end lifestyle and can afford the lofty price tag. But the question is how much are consumers really willing to spend to have the ultimate driving machine in their garage?

If you’re in the market to purchase a new BMW SUV in the U.S., you’re looking at a sticker price of about $56,000; however, if you head over to China the same vehicle is sold for a around three times that amount at a whopping $153,000.  With that significant of a difference, there is a large window for illegal arbitrage, and that is just what prosecutors are starting to see around the country.

According to The Wall Street Journal, at least 35,000 luxury cars are purchased legally at dealerships every year and then sent out of the country to be turned over for profit. In an effort to prevent more shipments from leaving the U.S., federal prosecutors have targeted and seized a number of high-end cars at various ports in recent months, before the automobiles left the country.

While some argue this type of business is completely legal since after purchasing a car it becomes the user’s property to do with as they wish, prosecutors believe differently, stating that the transaction becomes illegal when a buyer misrepresents their intentions during the purchase. In fact, most car dealerships now require new car buyers to sign an agreement before they even drive the car off the lot that promises not to export the car for a certain period of time.  This kind of arbitrage not only goes against a dealer’s integrity, but dealers who knowingly sell cars for export can face fines and the withholding of vehicles by manufacturers. 

With these types of incidents becoming more prevalent in the U.S., the government is on high alert to ensure that the illegal transport of high-end vehicles such as BMW and Porsche are curbed as much as possible.

So who’s right in this scenario? While neither side of the argument has been justified in court just yet, with more and more cases arising, the government continues to seize the property and assets of exporters that are caught, and prosecutors expect exporters to begin contesting those seizures as more cases are filed.

The government isn’t the only party that is feeling undermined by these illegal acts. China has also voiced its concerns regarding companies that charge more for cars and other goods in China. Automakers are also feeling the backlash as it is their responsibility to ensure each car is sold with the proper warranties and equipment for the country in which the cars are sold to be driven.

Unfortunately, no matter how much government officials and car dealerships try to monitor and lessen this kind of behavior, there is no way to completely stop the arbitrage of these vehicles until more cases are brought to court and real laws are put into place.

 

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Contributing Author

Stefanie Mosca

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