Large price cuts spurred record growth in China’s car market in January, according to the Asian auto industry marketing company, Automotive Resources Asia Ltd (ARA). Sales of passenger cars made in China topped 60,000 units in January, an increase of 56 percent compared to a year earlier.
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Growth was sharpest among entry-level products, thanks to 20 and 30 percent price reductions by small carmakers. Mini cars – powered by engines of 1.0 litre or less – grew 127 percent, while subcompact demand expanded at a clip of 107 percent. The Tianjin Charade and Chang’an Suzuki Alto, China’s two biggest price cutters, were the two largest sales gainers, growing 70 percent and 80 percent respectively.
In contrast, high-end cars like the Accord, Passat and Buick Century (cars priced at more than $US30,000) only grew 10 percent. Many people attribute the price drops to China’s entry into the WTO and the threat of imports. ARA says that in reality, the downward pressure on prices is more the result of good old-fashioned competition within China’s auto industry.
Market incumbents Citroen Fukang, Tianjin Charade and Chang’an Suzuki Alto all lost market share in 2001. Fukang sales were flat last year, hanging around 50,000 units. This came as a surprise to this model which had been growing 20-30 percent every year since 1997.
Charade and Alto’s sales both decreased nearly 25 percent in 2001. These models lost market share to newcomers like the (Opel Corsa-based) Buick Sail, Chery, Geely and Eagle.
“We may be at the precipice of a war of attrition,” says Michael J. Dunne, president of ARA.
ARA expects demand to continue, albeit at a much lower rate in the months ahead. For the year 2002, ARA projects that the market will grow between 15 and 20 percent.
