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China's Car Market Remains in Low Gear
In contrast to excitement of the ongoing auto gala in Beijing, China's car market still remains subdued.
The seven-day auto show held in the China International Exhibition Centre in Beijing attracted more than 40,000 visitors on opening day. More than 100,000 admission tickets were sold.
Nearly 1,000 auto makers from 23 countries and regions are displaying their products, and more than just cars, in the 70,000-square-metre showplace.
Despite domestic car price cuts, car sales from January to April amounted to only 168,630 units nationwide, a mere 2.3 per cent increase from the same period of last year, said sources with the State Administration of Machine-Building Industry.
With expectations for a car price drop after the country's accession to the World Trade Organization (WTO), many consumers are biding their time.
"I will postpone my car purchase until next year because I believe prices will slide after China enters the WTO,'' said Li Hanchen, a foreign company employee.
China will cut tariffs on auto imports from the current 80 per cent to 100 per cent level to 25 per cent by mid-2006, with the largest cuts coming during the first two years after its WTO accession, which is expected this year.
"I will have more choices next year; maybe I will buy an imported car,'' Li told Business Weekly.
"We appreciate all the luxury-brand cars, whether the Mercedes-Benz, BMW, Lexus and Lincoln, but they are a distant dream. We need more economical models priced at about 100,000 yuan (US$12,000),'' said the young couple Xu Feng and Zhou Wenchun, who are employed by a government institution.
Chinese consumers now have few choices in picking an economical car, but foreign auto makers are cognizant of the tremendous potential of the economical car market in China.
Toyota, approved by the Chinese Government at the end of May to establish a joint venture in North China's Tianjin, will begin producing Toyota-brand compact cars in 2002.
The Japanese auto maker is exhibiting its compact cars including the Funcoupe, Funcargo and Funtime.
"An unfavourable car consumption environment has dampened consumers' purchasing zeal,'' said Que Xiaogang, a manager at the Beijing Asian Games Village Automobile Exchange.
Central and local governments charge high taxes and assess numerous arbitrary fees on car consumers.
Que's auto exchange sold about 1,400 cars last month, compared to about 2,000 in April.
Sixteen domestic auto makers recently appealed to the government to reduce auto consumption taxes and to cancel arbitrary fees.
There are indications that the government will heed their appeal.
The Ministry of Finance and the State Development Planning Commission on June 2 announced that 238 administrative fees imposed on auto consumers will be cancelled beginning in July.
The move is expected to save consumers 14.5 billion yuan (US$1.75 billion) per year.
"I am not optimistic about the car market because of surging fuel prices and the current low income levels of common people,'' said Beijing taxi driver Wang Ruisheng.
In Beijing, the price of 93-octane gasoline has topped three yuan (US$0.36) per litre largely because of crude oil price increases.
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