Drastic Price Cuts Shake Auto Market

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Last updated at: (Beijing Time) Thursday, January 17, 2002

Drastic Price Cuts Shake Auto Market

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Xiali leads price cut

The drastic price cut in the compact Xiali cars made from Toyota technology, in Tianjin north China, has kicked off a price war in the automobile market one month after China's official entry into WTO.

The latest model, Xiali 2000, now sells for 97,000 yuan (11,680 US dollars), down 20 percent from 119,980 yuan (14,455 US dollars).An earlier model is now 39,800 yuan (4,795 US dollars), which is the lowest price on the market.

This is the most drastic price cut in the past two years and many car buyers returned to the stagnant market overnight.

Statistics show that 1,800 Xiali cars, 10 times of the usual sales, have been sold during the weekends following the price reductions.

"We have provided an additional 2,000 cars to our dealers throughout the country because many are short of supplies and the hot purchase will continue for some time," said Xiali market analysts.

A wise move

Market experts said Xiali has launched a campaign and this will impact on other car manufacturers, especially those whose products sell for around 100,000 yuan (12,000 US dollars).

Meanwhile, other cars including Buick Sail, Citroen also lowered their prices but still could not compete with Xiali.

Xiali is the first domestic carmaker to drastically cut prices since China formally entered the WTO over a month ago and promised to lower customs duty on imported cars. Over the past months, Audi, Benz and other giants have begun to cut prices to keep up with the new market.

Experts said it was a wise move for Xiali to cut prices and reduce car stocks before the influx of cheap overseas cars which will bring intense competition between domestic manufacturers.

Wait and see cheaper cars

An on-line survey of Tom.com said 59.4 percent of the 366 surveyed choose price cuts as a primary reason to buy a car. About 49.82 percent of 568 surveyed said they would buy cars priced below 100,000 yuan (12,000 U.S. dollars).

China's domestic automobile industry has been thriving in big cities such as Beijing, Shanghai and Guangzhou. But the market slowed down after China's entry into WTO.

Many people are now waiting for cheaper and better imported cars, said experts.

The survey on Tom.com indicates that 84.39 percent of 474 surveyed said they do not plan to buy cars before the coming Spring Festival, which falls on February 12.

The Chinese government has promised to gradually lower customs duty on overseas cars, but it is a long-term process and the tariff barrier is not likely to disappear overnight.

Decades ago, Chinese car prices had to strictly abide by the government price system as did the other products. Since 1995, domestic manufacturers have been permitted to readjust prices by 10 percent based on benchmark levels set by the State Development Planning Commission.

In the past few years, the government has relaxed its pricing controls on domestic cars and granted domestic manufacturers full latitude in pricing.

China's auto industry and WTO entry

China's Automakers Calm About WTO Entry

China's automakers, undaunted by the country's upcoming entry to the World Trade Organization (WTO), have moved to prepare themselves for the new challenges and opportunities.

Post-WTO Competition to Boost Auto Industry

China's auto industry, although not as efficient as its big foreign competitors, will be able to survive the challenges it will face when the country enters the World Trade Organization (WTO).

Lu Zhiqiang, deputy director of the State Council-affiliated Development Research Centre, said the WTO entry was not a "gate to hell" for the auto industry.

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