A sluggish market demand and continuous price drops have made China's burgeoning auto industry a hot topic at the annual conference of the Boao Forum for Asia (BFA), according to Sunday's Economic Daily.

A discussion on the subject cited three major problems: the disadvantages of China's self-designed auto brands, pressure caused by oversupply and inefficient financing services.

Despite the lack of effective solutions, the discussion clarified the thorny issues and made the sector more alert of its severe situations, according to the Economic Daily article.

Currently, there are 355 auto brands in China's market, according to figures from the China Association of Automobile Manufacturers (CAAM). Of the 100 brands for sedans, 37 were domestically designed. Meanwhile, about 90 percent of the 97 truckbrands and 76 percent of 158 passenger car brands are designed in China.

Many of these Chinese auto brands did not hold inspiring marketshares in spite of the large percentages, said CAAM executive deputy director Jiang Lei.

So far, the aggregated market share of domestic brands has dropped from 23.97 percent in 2003 to the present 19.67 percent. The sales volume of self-designed luxury sedans Red Flag and Zhonghua reported declines of 40 percent and 58 percent separately.

"Everyone is concerned about the year's slower growth rate of 15.17 percent in China's sedan sales, the drastic decline in termsof self-designed brands, however, have posed increasing pressure,"said Jiang.

Another problem as many participants acknowledged, is the oversupply of automobiles. According to figures from the National Bureau of Statistics, the present auto supply is some 130 percent of the market demand.

Other foreign experts predicted that 60 percent of China's auto machines will be left unused by 2007.

The rough competition already forced out some non-public companies that were tempted into the auto industry last year.

"A new round of mergers and restructuring is just around the corner," according to the newspaper.

Reviewing the industry's past prosperity powered by car loans, many participants held that commercial banks' precautions in helping consumers finance their car purchases also contributed to the present sluggishness.

Official statistics showed that the total balance of all China's financial institutes in individual car loans rocketed from 400 million yuan (48.37 million US dollars) in 1998 to 200 billion yuan (24.18 billion US dollars) in 2003. The upward tend came to asudden halt by 2004 as the proportions of non-performing loans caught many institutions off guard.

Currently, only five to 10 percent of cars purchased were made through loans. Previously, the proportion was as much as nearly 30percent.

To remedy the situation, participants called on the developmentof specialized car financing companies who usually control about 80 percent of car loan business in Western nations. Compared with commercial banks, financing companies can provide more flexible, diversified services and therefore should receive more support from the governments.