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China's Auto Sector on Threshold of Big Price Reduction
Although most of China's giant car makers insist they will not reduce prices, government officials and experts said the consumers are clever enough to wait before emptying their pockets, according to Tuesday's Chinadaily.
There is considerable room for China's auto manufacturers to cut prices of their products, said Gan Zhihe, director of the Investment and Planning Department under the State Economic and Trade Commission.
The popular Santana sedan, made by the Shanghai Volkswagen Automotive Co Ltd, now sells at about 120,000 yuan (US$14,510). However, experts said it could sell at less than US$5,000 in Germany, or other Western developed countries.
China's current excessive tariff imposed on imported cars, from 80-100 per cent, has been the main umbrella protecting domestic car makers.
Nearly all China's main auto manufacturers have heavy overseas investment, including the Sino-German Shanghai Volkswagen Automobile Co Ltd, the Sino-US Shanghai GM Automobile Co Ltd, the Sino-German FAW (First Automotive Works) Volkswagen Automobile Co Ltd, the Sino-French Dongfeng-Citroen Automobile Co Ltd and the Sino-Japanese Guangzhou Honda Automobile Co Ltd.
Gan said that some Chinese car makers have begun to adjust their selling prices, as China's imminent entry into the World Trade Organization (WTO) will bring fierce competition to China's auto market.
Moreover, painful as it would be, price cut is an unavoidable choice for Chinese car makers.
With China's entry into WTO, China has to cut the tariffs on auto imports to 25 per cent within five years. In two years, China will cut the rates to 60-80 percent from present 80-100 per cent.
The cuts of the tariffs will bring great pressure on domestic car makers to reduce the price of their products, and some of them have already trimmed their selling prices.
Two months ago, the Shanghai Volkswagen Automobile Co Ltd slashed the price of its Santana 2000 by 10,000 yuan, the prices of Citroen-Fukang series of cars were reduced by 6,000-15,000 yuan, and last month, the Tianjin-based Charade (Xiali) Automobile Company decided to cut its prices by 3,000 to 8,000 yuan.
In another development, China's State Administration of Taxation has announced a 30 percent decrease in the consumption tax for the automobiles that meet the European II fume emission standard.
The decision indicates the authorities' position of encouraging production and consumption of environmentally friendly vehicles, which, experts said, will greatly stimulate the production and sales of qualified cars.
The policy will also trigger domestic car makers to reduce prices of their products, many standing high in the warehouses, because domestically-made cars can hardly make the European II standard.
At present, many of China's well-off urbanities are holding money with a wait-and-see attitude. It is predicted that market sales will achieve a robust growth with the coming price cut.
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