The global financial crisis is hurting consumer confidence and consumers' willingness to purchase big ticket items such as cars.
"To buy or not" has become the latest question for consumers who are deciding to hold onto their cash, leaving Chinese car makers with a sales slump and loss of profit.
Analysts said that they expect sales growth for passenger cars to fall below 10 percent this year, compared to an average increase of more than 20 percent over the past few years, but that the steady growth of China's auto industry was an irreversible trend in the long term.
The Chinese government has announced a 4-trillion-yuan (US$586-billion) stimulus package over the next two years to help revive fast economic growth, a move widely believed to have a positive impact on vehicle sales.
Car makers have also introduced various measures such as product restructure and car loans in a bid to remain competitive.
Government policies such as fuel tax reform and favorable tax breaks on small-engine vehicles are also highly anticipated as factors helping to rescue the auto market.
New energy vehicles
General Motors recently announced that its Chevrolet Volt Extended-Range Electric Vehicle will be introduced to China by 2011, one year after its launch in the United States.
The Volt E-REV uses electricity stored in its 16-kWh lithium-ion battery for the first 64 kilometers. When the battery's energy is depleted, a gasoline or ethanol 85-powered engine could generate extra electricity and enable the car to run another several hundred kilometers.
"The Volt is symbolic of GM's strong commitment to the future," said General Motors Chairman and CEO Rick Wagoner. "It is the kind of technology innovation that our industry needs to respond to today's and tomorrow's energy and environmental challenges."
Before the Volt, GM's local venture Shanghai General Motors also started local production of hybrid LaCrosse sedans in China, which has an improved fuel efficiency of 15 percent.
GM is stepping up the production of new energy vehicles although problems such as high prices and charging difficulties remained.
New energy vehicles such as hybrid cars, electric cars and hydrogen-powered vehicles will become more popular as the world turns its attention to fuel-saving and environment protection.
Domestic car makers are also following this global trend.
During the Beijing Olympics, a fleet of self-developed new energy vehicles such as Chery A5, Chang'an Jiexun and SAIC's Shanghai-branded hybrid sedan all underwent trial operations before mass production.
Analysts said that although the new energy vehicles wouldn't have an immediate impact on sales, domestic car makers would still benefit from improved technology for sustained development in the long term.