Sources from Zhong Lian Auto Parts & Accessories Trade Co Ltd, operator of the system, revealed that the company will set up 40 central franchise shops around the country in the first half of this year.

And central franchise shops are expected to cover the nation's key cities by the end of 2003.

Under the system, franchise shops may authorize retailers to carry out business in local markets.

Wang Tao, assistant general manager of Zhong Lian, told China Daily that, so far, the company has got certification from nine Japanese original equipment manufactures (OEMs) to exclusively sell their products in China.

"All products should be directly imported from the OEMs and sold at set prices around the nation," said Wang.

The nine OEMs include Denso, Mitsubishi Electric, CHKK, Koito, Hitachi, NWB, Soft99 and Mikuni.

"Another six enterprises are to sign contracts with Zhong Lian in May," said Wang.

Experts say the move will help to standardize the market, crack down on counterfeit products, provide favourable prices to consumers, as well as promote the OEMs' brands.

Yan Lixing, All-China Federation of Industry and Commerce Auto (Motorbike) Parts Chamber of Commerce, told China Daily that before the establishment of the franchise system, consumers had to buy auto parts and accessories of Japan-made automobiles from their after-sale service agencies, who in turn were supplied by their OEMs.

"The procedure added to operation costs, hence, price increases," said Yan.

This in turn created a black market with some auto parts and accessories retailers selling counterfeit or smuggled goods at much lower prices. This illicit trade harmed both market order and the interests of both the consumers and manufacturers.

An official from Japanese Denso said the direct sale or franchise system also offered opportunities for the OEMs to display their brands in the market, which affiliates them to promote their other products to consumers.

(China Daily April 1, 2003)