Toyota Cuts Passenger Car Prices By Up To 20% In China
DOW JONES NEWSWIRES
January 14, 2005 1:22 a.m.
TOKYO -- Toyota Motor Corp. (7203.TO) said Friday that it has cut the prices of the passenger cars it sells in China by up to 20% in an effort to improve its competitiveness in the world's fastest-growing auto market.
Toyota has reduced the prices of the Vios subcompact and the Corolla midsize car that it produces at a joint venture in Tianjin with major Chinese automaker FAW Group Corp. The price cuts range from CNY15,000 to CNY25,000 a vehicle, a Toyota spokesman said.
The automaker is able to lower vehicle prices due to cost-cutting efforts at the local plant, which started paying off two years after production at the venture began, the spokesman said.
The latest price cuts by Japan's No. 1 car maker by sales come at a time when automakers in China are stepping up efforts to offer lower prices of their vehicles to spur waning demand after the Chinese government implemented credit-tightening measures aimed at stopping overinvestment in several industries.
German luxury car maker BMW AG (BMW.XE) said earlier this week that it cut prices of some of its China-made passenger vehicles by up to CNY100,000.
China's auto sales grew about 15% in 2004, which was much slower than its growth by more than 50% in 2002 and 2003. The slowed growth is due to Beijing's efforts to cool China's booming economy and also because consumers held off buying cars on expectations that prices will drop.
The price reductions may help Toyota, which plans to begin production of its flagship luxury Crown sedan and gasoline-electric hybrid Prius small car in China this year, hit its target of a 10% share of the Chinese market by 2010.
However, the lower prices aren't necessarily a good sign as they may squeeze Toyota's profitability especially as costs of materials to build vehicles, such as steel sheets, are rising.
Passenger car sales in China are expected to grow around 22% this year, according to a report published by Merrill Lynch. However, this is because prices are expected to fall by around 7% to 15%, Grace Mak, a vice president of Merrill Lynch's China equity research, said earlier this week.
While she expects profit margins for Chinese carmakers to come under further pressure due to the price cuts, the pressure may be alleviated by cost reductions through economies of scale as production volume rises, she said.
-By Yoshio Takahashi, Dow Jones Newswires; 813-5255-2929; yoshio.takahashi@dowjones.com |
