"Legalizing parallel imports is part of a broad anti-monopoly campaign by the government to improve market order and bring down prices of imported cars," he said, asking not to be identified as he is not authorized to speak to the media.
In an emailed proposal reviewed by Reuters, the China Automotive Technology and Research Center (CATARC), a government-affiliated think-tank, lobbied Beijing a year ago to legalize parallel imports "to break monopoly and promote competition."
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Sales of premium cars rose by more than a fifth last year to around 1.6 million vehicles, according to consultancy Automotive Foresight (Shanghai) Co Ltd, but still account for less than 10 percent of China's total car sales. Together, Audi, BMW and Mercedes have around 70-80 percent market share in the premium segment.
More than 20 dealers have applied to join the pilot scheme, where imported luxury models will be sold at a 10-20 percent discount to those available through authorized channels, said an official at the Shanghai Waigaiqiao Automobile Exchange Market, the market organizer.
A BMW 650i xDrive Convertible that sells from $97,900 in the United States, can cost close to 2 million yuan ($320,179) in China. That scale of price differential has come under fire from Chinese media, and regulators last year fined a Chinese venture of Audi and the local sales unit of Fiat's Chrysler a combined $46 million for price fixing.
China has had a grey market in auto sales for some time, centered around the northern port city of Tianjin where about half of China's total car import deals are done. But buyers have been cautious given the lack of quality guarantee and after-sales service on unauthorized cars.
That will change under the new scheme.
"The main significance (of the pilot scheme) is that buyers will now be legally entitled to warranty packages," whether their imported car comes through an authorized or unauthorized channel, said IHS Automotive analyst Namrita Chow.
Analysts said it was difficult to gauge the likely impact on car prices given a lack of clarity over which models come under the parallel import scheme.
In an emailed statement, Audi said its dealer network in China was "very well prepared for competition," while BMW said it doesn't expect any "substantial" impact on its China business.Daimler, which owns Mercedes-Benz, said it was too early to comment.