Foreign auto makers have seen sales in China drop this year, as Chinese consumers wait for new models and the lower prices expected after Beijing joins the World Trade Organization, executives said Monday.
Sales for General Motors Corp.’s luxury Buick model fell 48 percent in the first three months of the year from the last quarter of 1999, said Lawrence Zahner, president of the U.S. auto giant’s China group.
For Volkswagen AG, which holds a commanding share of the Chinese auto market, sales dipped 6 percent January-through-May over the same period last year, said Stefan Jacoby, vice president for the German auto maker’s Asia-Pacific Region. He said a drop in sales from its Shanghai plant was offset by a rise in Changchun.
Both auto executives spoke ahead of an industry trade show in Beijing and gave different reasons for the decline in sales.
GM’s Zahner said consumers expected that WTO membership would cause car prices to fall by 50 percent.
China’s auto industry suffers from too many inefficient producers and even the car makers with venture partners like GM and Volkswagen face a welter of price-raising fees. Entry to WTO will force China to drop tariffs and make the domestic industry compete with suddenly cheaper imports.
Competition from WTO will shrink Volkswagen’s share of the Chinese market over the next five years to 35-40 percent, from 50 percent, Jacoby said.
But he said Volkswagen’s recent decrease in sales had more to do with customers delaying purchases from Shanghai in anticipation of a new model Passat. Jacoby said the company plans to invest another $1.4 billion to fend off competition.
“I think we understand the situation here,” Jacoby said. “We’ll react. We’ll bring new models. We’ll modernize our factories. We’ll liberalize the supply market and the supply chain.”
Volkswagen will launch a new sales and service company in August, comprised of 230 to 280 dealers and 12 regional service centers nationwide. It also plans financing services once Chinese regulations are in place, Jacoby said.
To lure customers, GM cut prices on the Buick by $2,500, and as part of its expansion strategy, in April introduced a mini-van based on the Pontiac Montana, said Zahner. He said that helped lift sales 8 percent in April from a year earlier.
GM also hopes to produce a lower-priced model for family car buyers in China to complement the $40,000 Buick sedan, Zahner said. He said the company is still negotiating to find a suitable local partner and win approval from the Chinese government.