[Stop whining<g>.The car price should come down] -- "New car prices come under pressure in China"
7th January 2005
The New Year announcement of Ford’s latest addition to automotive capacity in China and the imminently expected conclusion of MG Rover’s deal with SAIC coincide with the advent of steep price reductions and warnings of excess capacity.
FAW Car Co .cut the prices of Mazda 6 models produced under licence by 25,000-40,000 yuan (US$3,020-4,830). Other price cuts from companies such as Dongfeng are expected this month, following New Year price cuts for imports due to tariff cuts effected under China’s new WTO membership obligations. China removed quotas on vehicle imports and cut tariffs to 30% on January 1 from last year's 34.2-37.6%. Tariffs will fall to 25% by the middle of next year.
Prices in the Chinese market are forecast to fall at a faster rate this year than last year. Average prices will drop by 15% or more compared to last year's fall of 10%, according to Cao Jianhai, an industrial researcher with the Chinese Academy of Social Sciences. Almost all domestic and foreign auto makers cut the prices of their China-made cars last year, ranging from local players Chery and Geely to Audi and BMW. "Car prices in China will tumble by 50% in four years due to mounting competition, domestic producers' expanding economies of scale, and lower income levels and labour costs in China than in the developed markets," Cao said, adding that domestic car prices will ultimately be 40-50% lower than in developed markets
Official forecasts suggest Chinese vehicle sales will grow 12% year-on-year to 5.64 million this year, with passenger car sales increasing 16% to 2.64 million units. Total sales of China-made vehicles and sales of passenger cars are estimated to have reached 5.04 million and 2.27 million units last year respectively, up 16% and 18% year-on-year.
While Ford and others, notably VW are investing to increase capacity in China, the China Association of Automobile Manufacturers spokeswoman Zhu Yiping has told China Daily that domestic manufacturers should cut their production in order to maintain price stability. "They discuss joint action in the same way as members of OPEC [the Organization of Petroleum Exporting Countries] do. Some auto makers' price cuts were harebrained and destroyed customer confidence," Zhu told China Daily. She, however, predicted that prices in the domestic car market would stabilize next year.
Car production capacity in China may be 30% larger than real domestic car demand this year, up from last year's 20%. Car makers' and dealers' total inventories stood at nearly 600,000 at the end of last year, according to reports. There are around 120 vehicle plants in China, with more than 30 turning out passenger cars. (Source: Asia Pulse/XIC)
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