Car price wars break out
Updated: 2007-10-10 09:52
Shanghai GM said in the first half that it aimed to sell 480,000 vehicles this year, up from 400,000 units in 2006.
The Hyundai venture last month lowered its 2007 sales target from 310,000 units to 250,000 units.
A phalanx of other carmakers - such as PSA Peugeot Citroen's tie-up with Dongfeng Motor Corp, and Honda Motor Co's venture with Guangzhou Automobile Corp - are also suffering slower growth and difficulty attaining sales targets this year.
Although these carmakers have not announced official price cuts, their dealerships have already offered hefty incentives on plenty of models, such as the Buick LaCrosse, Honda Accord and Citroen C-Triomphe.
Yale Zhang, director of Greater China Vehicle Forecasts for US industry consultancy CSM Worldwide (Shanghai) Ltd, said price cuts are a "very swift way" to boost car sales in China where most car customers remain first-time buyers without strong brand loyalty.
"They will choose your products if you provide cheaper cars than your rivals. They have already got used to price cuts," Zhang said, adding that compact and mid-sized cars are the two most competitive segments this year.
There are plenty of all-new and facelift models on the block during the remainder of this year, which, he said, will force old comparable models to reduce prices to defend their market share.
For example, Ford Motor Co's joint venture with Chang'an Motor Corp last month unveiled a 2.3-liter new Mondeo sedan that will go on sale before the end of this year, retailing between 210,000 and 250,000 yuan.
Zhang estimates that passenger car sales in China, including sedans, SUVs and multi-purpose vehicles, will reach 5.2 million units, up from 4.1 million units in 2006. From January to August, sales surged by 27.2 percent to 3.37 million units, according to industry data.
However, Zhang Xin of Guotai & Jun'an Securities Co, said severe price contests will put cost-cutting pressures on carmakers that are also confronted with rising costs of materials, such as steel.
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