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HONG KONG: Price cut hopes make Geely's Chinese dealers wary of replenishing stock in August

By just-auto.com editorial team | 9 September 2004

Chinese carmaker Geely Automobile Holdings Ltd has reported that vehicle sales at its associates fell 32% in August as dealers were reluctant to replenish inventories amid hopes of further price cuts.

Reuters said the sharp year-on-year decline is the latest evidence that growth in China's car sector has slowed dramatically after nearly doubling last year to two million units.

Geely, which makes low-priced cars in China, reportedly said that in response to slower sales it had cut the sales price of its Maple sedans by between 3.6% and 10% from September. Geely's two associates sold a total of 4,407 vehicles in August, down 39% from July.

The news agency noted that car sales in China, the world's fastest-growing vehicle market, rose marginally in July from June after a three-month decline triggered when the Beijing government tightened credit in the hope of preventing economic overheating, though some analysts warn the recovery could be short-lived.

Geely reportedly said that although its dealers managed to sell more than 6,000 Geely sedans last month, they became reluctant to replenish inventories on hopes of further price cuts by manufacturers after a rival producer cut prices in early August.

Reuters added that the Chinese joint-venture partner of BMW, Brilliance China Automotive Holdings Ltd., also recorded the lowest sales for its home-grown Zhonghua sedan since its launch nearly two years ago, according to JPMorgan. The investment bank reportedly said Brilliance sold only 610 Zhonghua sedans in August.

But Brilliance's sales of minivans rose 80% month-on-month to 5,400 units after it cut prices of old models by 10% to 12% and launched cheaper models, JPMorgan said, according to the report.

Geely said that, for the first eight months, its associates sold a total of 66,970 Geely and Maple sedans, up 46% over the same period last year. Sales volume attributable to Geely amounted to 36,332 units during the same period.

The company reportedly said it remained confident that its sales could improve in the coming months, helped by the planned launches of six new models during the fourth quarter of 2004.

"The price reduction (on Maple) was implemented to pave the way for the imminent launch of a new four-door model of Maple sedans called M303 in the coming months," it said, according to Reuters.

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