Economical Cars, Still Lack a Market Force: Analysis

In recent years, the Chinese government has always encouraged the entry of sedan cars into families, to this end, it has successively abolished 200-odd car-related unreasonable charges, lately, it has published the standard for economical cars: engine displacement should be less than 1.3 liters, total length less than 4 meters, total width less than 1.7 meters, price stands at around 80,000 yuan and grants preferential treatment in consumption tax.

But it is quite another thing in the market, the cars newly produced by several major Chinese automobile factories, are all "non-economical" cars with displacement standing at above 1.3 liters whether they are Sail, Bora or Encore, thus running counter to the State's encouragement policy, whereas the mini-cars whose market price is below 80,000 yuan and engine displacement below one liter, with the exception of Alto whose sales volume has risen by about 8 percent, the sales volume of Xiali and WOW (Wings of wind) has dropped by about 19 percent and 50 percent respectively, the secret of which merits attention.

Consumers Seek New and Cheap Cars

Since China is a developing country, its overall income and consumption level should be relatively low, according to a sample survey by a department concerned, currently there are 20 million urban households each with an annual income of over 10,000 yuan, capable of buying 1 million mini-cars at a cost ranging from 40,000-50,000 yuan each; 2 million households each with an annual income of 100,000 yuan, capable of buying 100,000 low- and medium-grade cars priced at around 100,000-200,000 yuan each; there are also 234 million farmer households in China, 7 percent of which have had transport trucks for farm use, in 1999, the sales volume of such trucks reached 3.2 million units in China. This figure shows that low price is the first choice of most consumers. Compared with Xiali and WOW with falling sales volume, Alto is the only car whose sales volume has been rising since last year, this is because many new varieties of cars have been developed, providing the consumers with more choices. In the meantime, however, Alto Factory, working in cooperation with Japan's Suzuki Company, has gradually turned out Suzuki cars with the engine displacement standing at one liter and 1.3 liters, developing in the direction of large displacement.

On the other hand, with regard to cars enjoying preferential State policy, because main Chinese automobile manufacturers, the three major groups-the Shanghai Volkswagen, the FAW, and the second auto works in Hubei-do not produce cars with engine displacement below 1.3 liters, even if these factories plan to produce new style cars and put them on the market, it will take at least two to three years' time, mainstream automobile factories cannot enjoy such preferential policy within a short period of time, this implies that most consumers can hardly enjoy such a preferential treatment within a short period of time, either.

Delayed Publishing of Fuel Tax Regulation

The collection of road maintenance fee in accordance the type of vehicle irrespective of the distance it runs has given rise to the matter inconceivable to many people: the cost of taking a taxi is less than 800-900 yuan a month, and it is not worthwhile to have one's own car, because one usually has to spend more than 9,000 yuan on road maintenance fee each year, thus giving rise to the queer phenomenon of buying a car is not as good as chartering a car, the root cause lies in the fact that the current road maintenance fee is collected in accordance with the type of vehicle irrespective of the running distance, while the road maintenance fee is collected together with fuel tax abroad, it is relatively fair and conducive to encouraging the economical use of energy, special preferential policy is formulated for mini-cars, because mini-cars can save energy, cause relatively less pollution, occupy smaller road and parking area, in relevance to the national conditions of China which has a large population but limited land and roads, it should all the more encourage the development of small, low-and medium-grade sedan cars.

Is It the Use of Family Car Economical?

The delayed publication of fuel tax regulation has, to a great extent, determined that the use of family cars is not economical. In the meantime, no distinction is made between bus and car in the charge of parking fees, besides, there are various local stipulations restricting cars with small displacement engines, so that those who have bought mini-cars feel it very inconvenient. A person, who returned to work in China after finishing his studies abroad, bought a car, but soon afterwards he sold the car, because he found it hard to bear the charge of various domestic fees. According to a foreign survey, the cost of a car, from the day of purchase to its unserviceable time, accounts for only 25 percent of the total expense, an authoritative investigation result has not yet been found in China. This fact shows that whether the use of a car is economical constitutes an important aspect, it is evident that the government still lacks effective, preferential measures in this aspect.

With regard to the lowering of consumption tax collected by the government, the 30 percent cut from the mostly collected 5 percent consumption tax on cars is really limited, in particular, some people hold that since the government encourages the consumption of economical cars, consumption tax should logically be abolished, so these people take a wait-and-see attitude.

In addition, the old car trading volume abroad usually exceeds that of new cars, but this situation differs vastly in China, encouragement of the entry of economical cars into families should include old cars, but currently old car trade in China is being restricted due to various reasons, in the aspect of taxes, old cars are actually not value added, but still a 6 percent value-added tax is collected.

It can thus be seen that the expense of car should be reduced, the use and service charge should also be cut and should be transparent, so that the consumers are relieved of, or feel less, worries behind, only by doing so is it possible to set in motion the economical car market.

Local Restriction and Motorcycles

The market potential of Chinese mini-cars or economical vehicles can be seen from motorcycles. The production and sales volume of Chinese motorcycles has all along been ranked first in the world since 1993, and the said volume has stood at around 10 million units in recent years, whereas the annual growth rate of the Chinese economy has topped 7 percent for many years, it can be imagined that so long as 10 percent people among the motorcycle purchasers buy mini-cars or economical vehicles, then it will mean an annual scale of 1 million units, but the problem encountered, like that of motorcycles, is the various unreasonable restrictions imposed by local governments, the targets of restriction are usually cars of small displacement, low energy consumption, small size and low price, even two-carriage cars are subjected to restriction. This runs counter to foreign practice and the central government's policy of encouraging the use of small energy-saving cars, Such kind of restriction has immensely handicapped the development of China's economical vehicles.

It should be said that the most fundamental reason for the inability of small displacement economical cars to undergo rapid development is that China's technical level in this regard is backward, and the comprehensive performance and comfortableness of the cars equipped with small engines cannot match cars with large displacement, currently there are still no small displacement cars with a relatively high price-performance ratio, at the same time, the State should grant sufficient preferential taxation treatment, particularly preferential treatment in parking and daily use charges, so as to give prominence to the inherent superiority of small displacement cars in terms of low price, low energy consumption, low use and maintenance expenses and attract consumers to buy, because the market would not pay for the car, payers are the customers.

By People's Daily Online

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