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Mon, Jan 24, 2005 - Page 12 News List

China auto market growth slows

EASING OFF Though the country is still expected to hit 12% growth this year, that's a decline from the crackling 15% growth last year and a 34% boom the year before

AFP , Beijing

Chinese vehicle sales are likely to keep on slowing down this year and the stellar growth seen early this decade will probably never return, state media said yesterday, citing a leading industry analyst.

Total vehicle sales are likely to rise by about 12 percent this year to 5.8 million, Xinhua news agency reported, quoting Xu Changming of the government think-tank the State Information Center.

The "blow-out growth" of 2002 and 2003, when waves of newly-affluent Chinese acquired their first car, will not come again, Xu said.

Twelve percent growth would be welcome news in most countries' auto markets, but in China, it is down from 15.5 percent last year and 34.2 percent in 2003, according to previously released data.

Passenger car sales are expected to fare slightly better, with an increase of 17 percent this year compared with 15.2 percent last year.

But that, too, is a weak echo of roaring expansion rates seen in 2003, when passenger car sales sped ahead with growth of 75.3 percent.

Slowing growth reflects a gradually saturated market especially in the cities, where more and more middle-class families have now achieved their dream of owning a car.

It also reflects government efforts to slow down overheated industries including the car sector, with the introduction last year of stricter rules on auto loans.

The slowdown comes as unwelcome news for local and foreign automakers, with earlier reports indicating bulging inventories have already reached more than half a million cars.

The threat of lackluster sales has forced some companies to start cutting prices.

Luxury carmaker Bayerische Motoren Werke AG (BMW) saw China sales fall 16 percent last year from 2003 and has reportedly slashed the price of five domestically-made sedans by up to 100,000 yuan (US$12,000) per vehicle.

The trend for lower prices is reinforced by China's drive to cut tariff barriers to implement promises made in order to enter the World Trade Organization (WTO).

In less than 18 months, Chinese auto tariffs will have fallen to 25 percent, compared with up to 100 percent when China became a WTO member in December 2001.

Cutting prices may make sense for individual carmakers but for the industry as a whole, it could worsen the problems, since some families may postpone buying a car in hopes of a better deal later on.

Many of the world's top brands seem unfazed by the slowdown.

Japan's largest automaker Toyota Motor Corp plans to raise the number of dealers in China to 1,000 by 2010, a more than sevenfold jump from 140 dealers at the end of 2003, the Yomiuri Shimbun newspaper reported last week.

While the world's big automakers all want to enter China, the country's own auto manufacturers want out.

Fearing there will not be enough demand for rapidly increasing production capacity, several local makers are looking to export markets, eyeing China's immediate neighbors first.

The China Machinery Industry Federation is scheduled this month to hold auto exhibitions in Vietnam and Cambodia, focusing on Chinese-manufactured buses.

Others have much more ambitious targets. China's Chery Automobile recently reached a deal to sell its cars in the US.

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