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Honda Says Sales in China Slow down

Honda Motor Co., the first Japanese automaker to open a plant in China, said sales growth of its Accord sedans there is slower than expected as competition rises and prices fall in the world's third-largest car market.

Accord sales in China climbed 23 percent to 92,870 cars in the first 11 months of the year, Masaya Nagai, a spokesman for Honda China, said in an interview in Beijing.

Sales this year are "a bit lower than expected," he said while attending a car awards ceremony in the Chinese capital last Friday. "There are several reasons, including price-cutting and economic controls."

General Motors Corp., Volkswagen AG and other overseas automakers are reporting slowing sales in China, as buyers delay purchases in anticipation of further discounts and the government's lending curbs reduce access to credit. Growth in passenger car sales nationwide is forecast to slow to about 30 percent this year from 76 percent in 2003. China's government plans to maintain the lending curbs as part of its effort to maintain economic stability in 2005, Xinhua reported this week.

Tianjin FAW Xiali Automobile Co., the Chinese partner of Toyota Motor Corp. cut prices for its Xiali sedans late last month by as much as 10,000 yuan to 37,800 yuan (US$4,325), making it the cheapest sedan in China. Car prices may decline for the next five years because production exceeds demand, Xinhua said last month, citing a report by the State Information Center.

Honda, which has 5 percent of China's automobile market, said it had no plans to cut prices of existing models to boost that share. "We need to build customer loyalty,'' Nagai said. "Customers do not want the price falling after they've bought a car.''

China's automakers reported a combined 34 percent decline in third-quarter profit Nov. 29.

Honda, which also produces Fit, Odyssey and CRV vehicles in two China ventures, sold 190,344 units in the first 11 months of the year, a 70 percent gain as new capacity came on line and new models were introduced.

The company said last month it will invest 28 billion yen (US$265 million) to build a second plant in the southern city of Guangzhou, expanding to catch up with Volkswagen and General Motors, the two biggest overseas carmakers in China.

(Shenzhen Daily December 8, 2004)

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