WTO Entry Drives Car Prices Down

Home>>Business

Last updated at: (Beijing Time) Sunday, January 13, 2002

WTO Entry Drives Car Prices Down

Aware that China's WTO entry would trigger big growth in car imports, the country's leading automakers have initiated price cuts to retain sales since the beginning of the new year.

DISCUSSION

CHINESE

SEND TO FRIEND

Aware that China's WTO entry would trigger big growth in car imports, the country's leading automakers have initiated price cuts to retain sales since the beginning of the new year.

The car sales company for Jilin-based China First Automobile Group Corporation, one of China's three leading automobile manufacturers, recently announced that it has lowered prices for four of its Hongqi (Red Flag) models by an average of 30,000 yuan (3,614 U.S. dollars) per vehicle.

The four middle and top-of-the-range models, now cost between 219,000 yuan (26,385.5 U.S. dollars) and 319,800 yuan (38,530.1 U.S. dollars) each. "The new prices are lower than for imported cars of the same class," said Sun Baolin, marketing manager for the sales company.

Earlier, prices for Mazdas manufactured in South China's Hainan Province were also lowered. The cuts ranged from 10,000 yuan (1,205 U.S. dollars) to 20,000 yuan (2,410 U.S. dollars) per vehicle.

Dongfeng Citroen Automobile Co., Ltd., a Sino-French joint venture based in Hubei Province, has lowered the prices of its Fukang cars.

Shanghai Volkswagen Automobile Co., Ltd. and Shanghai GM Company Ltd., which together account for half China's car market, said that they would not consider price cuts in the near future. But analysts here suspect the length of the delay will be determined by strength of the impact from imported cars.

China's WTO commitment requires it to drastically lower car import tariffs over the next five years. On January 1 this year, the tariff for cars below 3L was lowered from 70 percent to 43.8 percent and for cars above 3L from 80 percent to 50.7 percent.

Customs statistics show 105 cars were imported through the Shanghai Customs in the first week of January 2002, a much higher number than over the same period last year.

Most of the newly imported cars, customs sources said, were well known brand names including BMW and Daewoo. Prices of many BMW cars are now 80,000 yuan (9,639 U.S. dollars) to 210,000 yuan (25,301 U.S. dollars) lower than December last year.

Chinese automakers reported the production of 643,373 cars in the first 11 months of 2001, up 17.14 percent year-on-year. Car sales reached 656,779 in the same period, up 22.9 percent.

More Car Price Cuts Expected

An unheard of 20 percent price cut for cars made by one major domestic economy car producer in Tianjin has excited many customers.

The Tianjin Automobile Industry Corp. announced Friday to cut prices of its Xiali economy cars in an attempt to keep its share of the market in a new round of price reductions between Chinese carmakers.

The price for the Xiali 2000 Century Square model was slashed by 20 percent, from nearly 120,000 yuan (14,500 U.S. dollars) down to 97,000 yuan (11,700 U.S. dollars), and a hatchback model dropped from 48,900 yuan to 39,800 yuan, the lowest price offered for such models on China market, according to sources.

China's entry into the World Trade Organization (WTO) has caused sharp tariff reduction on imported cars since the beginning of this year. Prices for imported cars have plunged, compelling domestic carmakers to cut their own prices for a competitive edge.

"We are under great pressure prior to this price markdown since China joined the WTO," said Kong Lijuan, a saleswoman.

"Customers care most about the price, and those high-powered well-equipped cars with a reasonable price will always sell well," said Sui Xinhua, a Xiali dealer.

Major car manufacturers, like Mazda in south China's island province of Hainan and the First Automobile Works in northeast China, have already reduced automobile prices.

Most dealers agreed that domestic car makers will continue a price-reduction policy for market shares for a longer time.

Price of Passat to Drop by 20,000 Yuan

China's Market Sees Medium & High Grade Cars Locked in Price War