Domestic car prices expected to fall by 5-10%
(Chen Zhiming)
05/29/2001
China's domestic car prices are likely to scale down by 5 to 10 per cent by the end of this year as the country has relaxed pricing controls on domestic cars and allowed manufacturers full latitude within the system, industry experts said. "With the lift of price controls, car price adjustment will become increasingly frequent," said Professor Chen Lifan with the Automobile Department of Shanghai Tongji University. Although car manufacturers insisted that car prices will remain stable in the comparatively short term, Chen believed that price wars for domestic cars could happen at any time. "There is room for further price cutting for domestic cars, especially for medium and high-end cars," Chen said. According to him, the price for a domestically-made Buick is about 280,000 yuan (US$33,700), but the cost is no more than 200,000 yuan (US$24,000). And the price for a Passat is about 240,000 yuan (US$28,900) in the domestic market compared to about 150,000 yuan (US$18,000) in the overseas market. "Compared with car prices overseas, the profits for car manufacturers are extremely high," Chen said, adding that the profits for domestic cars ranged between 30-40 per cent, while the figure in the overseas market is only 5-10 per cent. "With China's pending entry into the World Trade Organization (WTO), price slashing is inevitable in China," the professor said. He attributed another reason for the possible approaching price wars to the move by some car manufacturers to help dealers clear showrooms of their older models by selling them off. Zhejiang-based automobile maker Jili said that it started adjusting the price of four types of cars by dropping the price 7 per cent or 3,000 yuan (US$360) starting May 22. "It will help us to gain more market share," said Zhou Baoji, a representative of the marketing department of Jili Group, adding that the drop was based on the increasing lower cost of manufacturing. In another development, Chen pointed out that the prices for some domestically-made cars are very competitive and very close to international prices. In fact, the most acceptable price for a car is about US$10,000, according to international practice. "For consumers, price should not be the only benchmark; other factors should be also considered, such as quality, security and design," he said. Analysts believed the policy was a bold step towards promoting domestic market competition and car sales as the domestic market is moving from government purchases to private consumers. But they said the liberalization of price controls is unlikely to trigger a price war in the short term. Aspokesman for Shanghai Volkswagen said the price for its two major cars - Santana and Passat will remain stable in the short term.
|
