It's Elbows Out, Price Tags Down as China's Car-Industry Growing Pains Continue

[Hurricane]

It's Elbows Out, Price Tags Down as China's Car-Industry Growing Pains Continue
Date posted: 09-29-2008

SHANGHAI, China — A quarter of China's potential new-car buyers are planning to wait because of surging fuel prices, a new Nielsen survey has revealed. In the volatile climate — in which gasoline and diesel fuel are up 18 percent since June — automakers here are either cutting prices or considering doing so.

The Nielsen survey questioned more than 1,500 consumers in China's key cities, including Shanghai, Beijing and Guangzhou, and found that 71 percent of respondents did not currently own a car, but around a third said they were considering buying one. A whopping 22 percent of respondents declared themselves no longer in the market to buy a car. Eighteen percent of those who do still intend to make a purchase said they were considering a fuel-efficient car. Interestingly, a quarter said their higher incomes meant they were unaffected by the oil price rise.

"Consumer demand is still quite strong, particularly among the younger middle class," said Georgia Zhuang, head of Automotive Research at Nielsen China. "It is at this critical point where manufacturers need to keep themselves updated on consumers' needs and come up with offers or models that suit them under such a challenging environment," said Zhuang.

The unexpected sales dip in China's auto market has prompted carmakers to join a new round of price wars across all market segments. The return of the price wars has ended an upswing in car prices since the beginning of this year, triggered largely by soaring raw material costs.

Market observers yesterday said they remained skeptical about whether lowering prices would be helpful in spurring sales. The price reductions have also triggered market concerns that the sustained growth of the whole industry could be damaged, which would further erode carmakers' already declining profits.

The price cuts have been widely touted as the first shot in an impending price war among China's mainstream automakers as the prime September-October sales season arrives.

Tong Jiren, an independent auto analyst, says he believes more automakers will cut prices, "especially in the economy-car sector and the profitable mid-class segment."

Shanghai General Motors lowered the price of its Cadillac SLS by up to 11 percent. The 2.8-liter SLS now sells for the equivalent of $65,450-$72,750.

China's vehicle sales posted its first decline of this year in August, when domestic carmakers sold a combined 629,000 vehicles. That was a decrease of 6.34 percent from a year earlier, the China Association of Automobile Manufacturers said. For the first eight months of this year, vehicle sales maintained growth of 13.9 percent to 6.47 million units. But the growth was 11 percentage points slower than the same period last year.

The majority of domestic carmakers aggressively added capacity at the beginning of the year. But most of them failed to meet their half-year sales targets.

Some analysts are saying they believe other tactics besides price cuts will bring better results. Rao Da, secretary general of the China Passenger Car Association, said, "Instead, competition in technology, quality, marketing, brand and service will emerge as the main channels to win the market."

More here: http://www.edmunds.com/insideline/do...ticleId=132549

[GMusa]

Can you imagine what the traffic is going to be like in China once people start buying!

[CJ Thunder]

Originally Posted by GMusa

Can you imagine what the traffic is going to be like in China once people start buying!

Europe is feeling the credit crunch, China's spending has slowed after the Olympics and their exports are falling because of our slowing. Then the people at home stop buying the things made at home, that is the start of a downward spiral.

Can their industry last that long?

[racy]

Originally Posted by GMusa

Can you imagine what the traffic is going to be like in China once people start buying!

Frankly, I don't want to imagine it. What interests me most about the article is the implicit declaration that gasoline, and thus oil consumption might level off, or even decline.

The sooner we get the US and China in sync on declining oil demand, the sooner we can expect cheaper gas prices - or at the least a stop insane upward slope in prices.

[camaro_freak]

boo hoo... I don't feel too sorry for the Chinese right now. We've got our own problems.

All of GM's problems can't be solved by investing in developing countries so this may finally come back to bit them in the butt.

[Bravada]

Nice to see you wish GM bad. China's growth has been keeping GM afloat, they might actually be one hurt a lot by the slowdown.

I do hope high fuel prices stay put - this will encourage governments and businesses to pursue alternative propulsion sources more actively, and consumers to support that.

[Ambalanche]

Shanghai General Motors lowered the price of its Cadillac SLS by up to 11 percent. The 2.8-liter SLS now sells for the equivalent of $65,450-$72,750.

That is amazing considering they have to give away the STS here! Hello, GM, put the nice interior in the STS since it'll be 5 years before we get a new replacement for the STS/DTS! Thanks!

[TORRED1]

Good let their economy slow down, I dont feel sorry for them, maybe they will slow down thier consumption of oil. GM and other american companies should concentrate on making product here at home, that provides jobs and comsumers to buy those products. All this outsourcing has finally caught up with our economy and the reprocussions are trickeling right on up the ladder.

[jimmyisland]

Just don't underestimate the Chinese Economy. First they did a great job building the stadiums without copying(those are hundreds of million of investment). Now They just sent 3 men to the moon and came back safely(probably Billion of investment). What's killing them probably the recall milk.

When i was watching the Olympics, they even show off the 300mph speedy trains. Well, what is the fastest train in the USA. But go to Japan, and Europe, u can see faster trains too. Sometimes, i feel that the USA is not that high tech at all. We have the technology, but labor costs(simply too expensive, go to a dealer to fix a car, u will see) and inefficiency (people pay the same for working hard or lazy, so why work hard? ) are preventing so many things happening here. I live in New York, i've never seen them stop repairing the highway, but the highway still never got fixed.

Don't worry, when things can't go any worse, then they will become better. Same to our economy and our cars.

[Z16monte]

Originally Posted by GMusa

Can you imagine what the traffic is going to be like in China once people start buying!

At those prices, not much different than now.
Ed

[Z16monte]

Originally Posted by jimmyisland

JNow They just sent 3 men to the moon and came back safely(probably Billion of investment).

Apparently, they've successfully managed time travel as well
http://www.pcworld.com/article/151564/.html?tk=rss_news
Ed