The interest rate increase of China's
central bank a week ago will have little impact on the domestic
car market, according to analysts.
The central bank raised benchmark rates on one-year yuan loans
to 5.58 per cent from 5.31 per cent and that on one year deposits
to 2.25 per cent from 1.98 per cent last Thursday to cool economic
growth.
"We have not seen impact of the rate rise as it is very
small. The domestic car market maintains a stable track,"
said Zhu Yiping, the spokeswoman of the China Association of Automobile
Manufacturers.
But the association has not revealed auto sales for October.
"The rate increase will not have a big impact on the domestic
car market as only a small number of car buyers are using loans
at present," said Qian Pingfan, an industry researcher of
the Development Research Centre of the State Council.
Around 10 per cent of new car sales in China are using loans,
down from 30 per cent a year earlier, mainly because many Chinese
commercial banks have enhanced the threshold for auto financing
and even halted business because of concerns about bad loans.
Following the central government's move, General Motors Acceptance
Corp's branch in Shanghai raised its three-year and five-year
interest rates of auto loans to 6.99 per cent and 7.33 per cent
on Monday from 6.66 per cent and 6.99 per cent respectively.
"The small interest rate increase is unlikely to change
customers' minds about buying cars, as prices of cars in China
are much lower than houses in general," Qian said.
For example, if 70 per cent of the purchase of a Volkswagen Bora
worth 186,000 yuan (US$22,460) is funded by five-year bank loans,
customers will only pay more 1,000 yuan (US$121) than they had
to before the interest rate increase.
"The rate increase will be nothing for me if I have decided
to buy a car. But I will not foot a bill this year because cars
will be cheaper next year," said a Beijing white collar worker,
Jiang Linyun.
The growth of China's auto market has slowed down sharply this
year from last year.
Sales of China-made automobiles grew by 18.4 per cent year-on-year
to 3.7 million units in the first nine months of this year.
The growth rate was down 34 per cent from last year. Growth of
passenger car sales declined to 20.7 per cent during the period
from 75 per cent last year.
The main reason for the sales growth plunge is that many customers
have delayed buying cars in strong anticipation of further price
cuts as producers reduce prices frequently and China will continue
to slash tariffs and remove quotas on car imports next year, said
Jia Xinguang of the China Automotive Industry Consulting and Development
Corp.
"The interest rate increase is too small to affect the car
market in the near term. Only if it continue to rise by bigger
margins will there be some impact," Jia said.
Zhang Xin, from Guotai & Jun'an Securities Co Ltd, said:
"Interest rates alone will not have a big impact on the car
market now. We should wait and see further rate trends."
However, car dealers, with heavy inventories, are worried about
the interest rate increase.
"The rate rise is likely to further strengthen customers'
sentiment to delay buying cars," said Su Hui, general manager
of the Beijing Asian Games Village Automobile Exchange.
Car prices on the domestic market will continue to decline next
year and are expected to be stable in 2006, Qian said.
Most prices for cars made in China, including Audi and BMW, have
been reduced so far this year.
China will cut tariffs on auto imports to 30 per cent next year
and to 25 per cent in the middle of 2006 from 34.2-37.6 per cent
now in line with its commitment to the World Trade Organization.
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