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Brakes put on imported car sales
Sales of imported cars have entered the slow lane as potential purchasers wait on further price cuts expected next year.
Industry sources predicted that car imports would grow by just 15 per cent, after accelerating by 34.6 per cent in 2003, when the nation imported 172,683 vehicles, including 103,017 passenger cars.
Jia Xinguang, chief analyst with China National Automotive Industry Consulting and Development Corp, predicted: "Vehicle imports are not going to exceed 200,000 units this year."
This is due to the cancellation of quotas and further import tariff cuts as part of China's commitments to the World Trade Organization (WTO).
Tariffs will fall to 30 per cent next year from the current rate of between 34.2 and 37.6 per cent.
China's vehicle and components import quota will reach US$10.5 billion this year, up 15 per cent from last year.
Jia said that "consumers' purchasing delays will be even more obvious in the second half of this year."
This type of consumer behaviour is nothing new, it also occurred in late 2001 as China signed up to the WTO.
China slashed tariffs to 43.8-50.7 per cent in early 2002 from 70-80 per cent in 2001, the biggest cut since China joined the WTO.
Qie Xiaogang, an official with the Beijing Asian Games Automobile Exchange, the largest in the city, explained that although "many people have a look at imported vehicles, only a few buy them, despite the prices having dropped remarkably."
For example, a Mercedes-Benz S350 sedan now retails at 1.1 million yuan (US$132,800), down from 1.25 million yuan (US$151,000) at the end of last year.
Qie said the prices of imported vehicle prices will be slashed by a bigger margin than that of China-made autos.
The prices of foreign-made cars remained high although China cut its tariffs and increased its vehicle import quotas as part of its WTO membership obligations.
This was because the majority of quotas were given to components imports and licences of completed vehicle imports were in short supply.
Although licence charges to import a 2.0-to-3.0-litre car reached 120,000 yuan (US$14,500) last year, they have already halved by now.
The Ministry of Commerce will distribute two batches of vehicle import licences to dealers in April and October, ministry sources said.
But the government will ensure that foreign autos are not allowed to flood the market, taking measures next year to control imports which will not violate WTO rules, Jia pointed out.
The ministry sources said China will carry out a "registration system" on vehicle imports next year.
A dealer at the capital's Asian Games auto market said that although traders were currently "very cautious to stock imported vehicles. We pin great hope on the first half of this year because market conditions will be very tough in the second half."
More than 20,000 foreign-made vehicles lie idle in bonded areas in Tianjin, Dalian, Shanghai and Shenzhen, China's four major ports, according to statistics.
Jia said the majority of this year's import quota will continue to be given to components as foreign automakers will speed up China-based production with more new models.
The world's major auto makers will bring tens of new models into their factories in China this year.
Japan's Toyota will launch the Corolla on Monday at its joint venture in North China's Tianjin Municipality.
French PSA Peugeot Citroen will start production of the Peugeot 307 in April at the joint venture in Central China's Hubei Province.
Total vehicle output in China will reach 5.1 to 5.34 million units this year, including 2.5 to 2.62 million passenger cars.
"It will be one of the biggest headaches for imported vehicle dealers to select models available in the domestic market because more and more foreign cars will be produced in China," said Ding Hongxiang, deputy general manager of the China Trading Centre of Automobile Imports.
Even many luxury imports, such as the Mercedes-Benz C- and E-Class sedans of DaimlerChrysler, Cadillac of General Motors (GM), BMW and Toyota's Camry, will be locally produced this year or next.
BMW started to assemble its 3 and 5 series sedans in its joint venture in Northeast China's Liaoning Province late last year.
DaimlerChrysler will produce Mercedes-Benz C- and E-Class sedans at its joint venture in Beijing at the end of this year.
GM will introduce the Cadillac CTS and CRX limousines in its factories in Shanghai later this year.
And Toyota will produce the Camry at its joint venture in South China's Guangdong Province next year.
He added that the prices of domestically made cars will also be more competitive than the imported models.
Dealers have to choose "niche products" for the Chinese market, such as high-end sports utility and multi-purpose vehicles, sports cars, convertibles or ultra-luxury models to avoid overlapping with the domestically made autos, Ding said.
"Our business will mainly depend on BMW 7 series sedans as a result of local production of the 3 and 5 series," said a Beijing-based dealer of imported BMWs.
Ding also warned of "additional risks" in dealing in imported vehicles due to foreign currency fluctuations.
The euro's exchange rate against the US dollar surged by 20 per cent over the past six months, piling pressure on dealers of European-made cars.
"Dealers should be very cautious and make in-time adjustments according to many uncertainties, such as government policies, distribution of import licences and fluctuations in foreign currencies to minimize risks," Ding said.
The growing risks have made some imported auto dealers turn to locally produced models instead.
"I stopped the import auto business and started to prepare for building franchised stores for China-made cars at the end of last year," said a dealer, surnamed Liu, who sold Japan-made vehicles for a long time.
China's tariffs on vehicle imports are expected to decline to 28 per cent at the beginning of 2006 and to 25 per cent in July 2006. |
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