| Price war among automakers may not last too long: analysts |
| Monday,June 12,2006 Posted: 07:21 BJT(2321 GMT) Shanghai Daily |
The influx of new models in China's auto market has sparked another price war this month but analysts said the deals will not last long due to the low profitability of automakers. More than 11 new models have hit the market since January. Four were launched in the mid- to high-end segment, including the Lacrosse from Shanghai General Motors, C-triomphe by Dongfeng Citroen and Sagitar from FAW Volkswagen. However, the mid- to high-end market is saturated. Thirteen other models such as Nissan's Teana, Mondeo by Ford, Accord from Honda as well as Hyundai's NF also compete in the category. Under fierce market competition, Ford, Mazda and Honda cut prices on mainstream models last week. Discounts ranged from 10,000 yuan (US$1,250) to 15,000 yuan and averaged 10 percent of a car's price. Hyundai Motor Co also slashed prices on its NF sedan. The 19,000 yuan discount offered last Thursday was the biggest of all price cuts. "The price cuts are mainly to counter upcoming competition," said Hu Song, an auto analyst from Hai Tong Securities Co Ltd. "Toyota's Camry - with a low-price strategy - will be on the market soon. Discounts are an effective way to face competition and old models can control costs better than new models." Sluggish car sales are expected despite the price war. Prospective buyers may wait on the sidelines to see if prices drop further. Still, Hu said the discount window will not be open long. "Big discounts are not expected to last long because even an increase in sales will not cover a loss in profit," Hu said. According to the analyst, the average profit on a mid- to high-end sedan was less than 10,000 yuan. The profit on a compact car such as QQ, made by Chery Automobile Corp, was about 500 yuan per vehicle. The profit of China's automakers dropped 38.4 percent last year, after an 18.3 percent drop in 2004. "More companies may also plan to take advantage of large scale price discounts to boost sales as a way to meet 2006 sales targets," Hu told Shanghai Daily yesterday. "The price cuts are mainly to counter upcoming competition. Toyota's Camry will be on the market soon. Discounts are an effective way to face competition and old models can control costs better than new models." |
All articles marked with "Article type: Original" posted on the website of the Ministry of Commerce and its sub-sites are copyrighted by this Website and its sub-sites. Any reproduction or use by any other websites, media or individuals must be attached with a clear indication of "Source: Ministry of Commerce Website".
All articles posted on this website or its sub-sites marked with "Article type: reproduced" or "Article type: translated" and "Article type: redistributed" come from other media, and are provided solely for the user's information, which does not mean this Website or its sub-sites endorse the ideas thereof or assume any legal liability or responsibility for their authenticity. Any other media, websites or individuals must maintain the source of information indication on this Website or its sub-sites when using the information, and shall assume legal liability for the use.
