GM has reduced prices on two core models in China by up to 11 percent ahead of a major reduction in import barriers next year, the company said on Monday.
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Under China’s World Trade Organization entry commitments, import permit quotas are due to be axed from 2005 while tariffs will fall to 25 percent in July 2006 from around 40 percent at present, Reuters said.
Reuters reported that GM said its main venture, based in Shanghai, sold just over 94,000 Buicks in the first four months of the year, up 117 percent from the year-earlier period, outpacing the overall market which grew around 40 percent.
The high cost of production in China due to high tariffs on component and kit imports, logistics difficulties and other problems means making a car in the country can be substantially more expensive than in North America or Europe – in spite of the famed cheap labour.
Industry commentators fear that already under threat margins could be seriously dented by increased entry to the industry and some forecast a period of overcapacity ahead.
