Dealers warm up for Shanghai car show
By Dai Yan and Ravi Shankar (China Daily)
Updated: 2005-04-21 08:38

SHANGHAI: The glitz and the glamour will be on show, sleek new models will be rolled out and the ubiquitous short-skirted leggy models will add glitter to swanky sets of wheels.

But the smiles might be a little forced; and the salesmen less cocky.

The Shanghai International Auto Show opens tomorrow amid a downturn in the industry with buyers no longer snapping up cars as fast as they are being churned out.

The figures are telling: Passenger car sales are forecast to rise 12 per cent this year, three percentage points down from last year and a big plunge from the dizzying 75 per cent rise recorded in 2003. Average car prices tumbled by an average of 13 per cent last year, compared with an 8 per cent drop the previous year.

The sector reported 3.5 billion yuan (US$422 million) in profits during the first two months of the year, down nearly two-thirds from the similar period a year earlier; and the number of units sold in the first quarter fell nearly 8 per cent from the same period last year.

With the boom years tailing off, at least for the time being, auto makers - to use a time-tested strategy in tough times - are "consolidating," which means some of the weaker players may be weeded out and there could be mergers and acquisitions on the horizon.

Some of the measures being taken include:

Raising local content in manufacturing parts which would not only cut costs but respond to changes in the China market;

Moving the manufacture of more models to China which would give buyers a wider choice;

Getting the sales tag right to suit the price-sensitive market;

Introducing the appropriate engine-size models so customers can avoid paying a planned levy on large-displacement cars.

Car makers have had mixed fortunes in the recent past. The China ventures of Ford, Hyundai and Honda have been on an upswing while the long-dominant Volkswagen and General Motors units have seen a slump in sales.

Whatever its present state, the general consensus is that China's car market will grow steadily along with the economy; and the challenge for auto makers is to find the right manufacturing and sales strategies.

By 2020, China is expected to overtake the United States to become the world's biggest car market.

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