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Dealers Looking for Auto Sales Jumpstart

The Shanghai International Auto Show opens on Friday 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 just 12 percent this year, down three percentage points from last year and a big plunge from the dizzying 75 percent leap recorded in 2003. Car prices tumbled an average of 13 percent last year, compared with an 8 percent drop the previous year.

The sector reported 3.5 billion yuan (US$422.9 million) in profits during the first two months of the year, down nearly two-thirds from the same period a year earlier; and the number of units sold in the first quarter fell nearly 8 percent from the same period last year.

With the boom years receding into the distance, at least for the time being, automakers are employing a "tough times" strategy and consolidating, which means some of the weaker players will be weeded out and mergers and acquisitions may be on the horizon.

Automakers are already exploring such avenues as raising the content of locally manufactured parts, which not only cuts costs but also is more responsive to changes in the China market. The manufacture of more car models is also being moved to China.

Adjustments to product lineups and prices are also being eyed. Availability of smaller-engine models should increase as customers seek to avoid paying a planned levy on large-engine-displacement cars. Getting the sales tags right in the price-sensitive market is another task.

Carmakers 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 automakers is to find the right manufacturing, pricing and sales strategies.

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

(China Daily April 21, 2005)

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