The outlook for China's
once sizzling auto market has cooled, prompting both foreign and
domestic automakers to scramble to undercut their competitors
by slashing prices by up to 20 percent.
Both production and sales of vehicles in China are
forecast to rise about 10 percent in 2005 to about 5.6 million
units, state-run media reported Friday, citing the China Association
of Automobile Manufacturers.
The association reported that China's total vehicle
output climbed 14 percent over a year earlier to 5 million units,
with passenger bus production rising 12 percent to 2.3 million
units. Total vehicle sales were up 15 percent, also at 5 million
units, the official Xinhua News Agency reported.
Though still robust by international standards, that
growth outlook is anemic compared with the 75 percent jump in
passenger bus sales in 2003.
The fervor driving soaring sales over the past few
years has languished amid government-ordered curbs on bank lending.
With auto makers slashing prices, many consumers are thought to
be waiting for prices to drop further.
Toyota Motor Co. recently announced cuts of about
20,000 yuan ($2,400) on 19 different versions of its Corolla midsize
sedans and Vios subcompacts made in China. The price cuts amount
to up to about 20 percent of sticker prices.
Earlier this week, German luxury automaker BMW AG
announced it had cut prices on some China-made passenger vehicles
by up to 50,000 yuan ($6,000) to 100,000 yuan ($12,000).
BMW's sales almost tripled in 2003. But in the first
10 months of 2004, sales of its BMW and Mini vehicles, climbed
only 12 percent, to 13,461. Sales of locally made vehicles totaled
8,660, according to state media reports.
Paul Nolasco, a Toyota spokesman in Tokyo, said the
Japanese automaker's price cuts were spurred by calls from consumers
for lower prices and by the company's growing ability to cut costs
as its production ventures in China mature.
But he said the company did not plan any further
significant price cuts for 2005.
The slowdown in sales has been "a drastic change,
to be sure," Nolasco said. "But 15 percent growth in
many markets would be considered absolutely phenomenal."
Average prices in the domestic car market fell by
about 13 percent last year and by about 8 percent in 2003, the
Xinhua report said.
The China Association of Automobile Manufacturers
forecasts that passenger car output and sales in 2005 will climb
12 percent over last year, to 2.6 million units, it said.
Association spokeswoman Zhu Yiping characterized
the frenzied growth of recent years as "explosive" and
an anomaly. Sales have slowed because much pent-up purchasing
power and demand has already been exhausted.
"Last year's growth and the growth expected
this year are smooth and reasonable, although they are much lower
than the figures in 2003 and 2002," the report quoted Zhu
as saying.
"The industry will remain on a steady and healthy
track if the domestic auto market grows by more than 10 per cent
annually in coming years," she said.
Still, with capacity steadily rising and sales growth
flagging, inventories are growing.
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