My understanding from reading about the issue of car prices in China earlier when the Tesla story about its China price came up (http://www.teslamotors.com/blog

My understanding from reading about the issue of car prices in China earlier when the Tesla story about its China price came up (http://www.teslamotors.com/blog/fair-price http://www.teslamotors.com/blog/fair-price) was that luxury car manufacturers have managed to create a market in china where they can sell their cars at largely marked up prices (relative to U.S. for instance) and profit from most of that price increase. These luxury cars being by definition a luxury good, fall into they type of luxury good known as a Veblen good, in which the exclusivity associated with the high price is part of what makes these cars desirable. While this is seen in most markets for these cars, apparently early auto manufacturers selling luxury cars in China decided to go for a higher price point in China than in other markets. This created a market where new manufacturers who entered would be forced to choose between selling their luxury cars at lower prices (relative to the established luxury cars) therefore less exclusive and less desirable (sometimes even considered of lower quality) or selling them at similar mark ups and making extra money.