Chinese air-conditioner manufacturer, Aux, has been ordered to pay Yuan 200m (US$25m) compensation to automotive dealers for producing cars without a legal production licence.
The ruling, handed down by the district people's court in Dalian, north eastern China, is significant, coming as it does with the Chinese government trying to exercise tighter control over the country's booming automotive market.
The Ningbo, Zhejiang Province-based company has been ordered to refund 46 dealers who stocked the company's SUVs, according to the Shanghai Daily.
Aux used a simple strategy to enter the Chinese automotive industry – it bought a 50% stake in Fusang Heibao, a small domestic manufacturer of SUVs. Aux then used Heibao's production licence to build its own-brand SUVs, which it has sold at a price of around Yuan 68,000 (US$8,680) to Yuan 73,800 (US$9,420) since 2003.
A Dalian dealer explained that the whole procedure of paying money to buy a production licence was highly illegal. "We found it difficult to get reliable aftersales service and maintenance when the car manufacturer quit the market due to poor management and sales last year," the dealer said.
Shanghai Daily adds that Aux might eventually have to pay much larger compensation as more cases against the company are being filed in several cities across China. Aux has so far declined to comment on the court verdict.
This is not the first time that a non-automotive company has expressed interest in taking a share in China's lucrative car market. Mobile phone manufacturer, Bird, is also looking to establish a joint venture with Hunan-based Changfeng Motor. The joint venture is expected to begin production of small MPVs, known as the AM-08, by the beginning of next year.
