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Car Price Cutting War Unavoidable
Signs are growing that no carmakers in China can avoid a major price war on the domestic market this year as Shanghai General Motors (GM) and Shanghai Volkswagen on Tuesday cut the prices of their products simultaneously.

Shanghai GM on Tuesday reduced the prices of its six-version Buick sedans by 6,000-30,000 yuan (US$723-3,614).

Shanghai Volkswagen slashed the prices of its old Santana, Santana 2000 and 1.8-litre Passat models by 6,000-10,000 yuan (US$723-3,614).

The latest price cuts are inevitable as carmakers struggle for market share amid an expected jump in auto imports this year after the country's sharp tariff decrease, said Jia Xinguang, chief analyst of China National Automotive Industry Consultation and Development Corp.

China lowered the tariffs to 43.8-50.7 per cent from 70-80 per cent at the beginning of this year, the biggest cut after its entry into the World Trade Organization (WTO).

The move by Volkswagen and GM followed a 9,000-23,000 yuan (US$1,085-2,770) price cut of the 24 Xiali compact cars by Tianjin Automotive Industry Group earlier this month.

Many other carmakers, including Dongfeng Citroen and Chang'an Suzuki, have also cut the prices of their products.

However, there are still some hard-liners, such as Guangzhou Honda and FAW (First Automotive Works) Volkswagen, which yesterday announced they had no plans to decrease prices "in the near future".

The two Shanghai carmakers made the same announcement two weeks before their price cuts.

Qie Xiaogang, an official of Beijing Asian Games Village Automobile Exchange, one of the largest in the city, said more manufacturers would be involved in the price war before the Spring Festival which falls on February 12.

"A new round of price wars is expected to break out during the period from April to May this year," Qie said.

He forecast prices of passenger cars made in China would decline by 10-20 per cent on average this year.

Jia said the price war was also powered by debuts of more new and cheap cars on the market.

Yuejin Fiat Automobile Co, based in Nanjing, Tuesday launched the Italian carmakers' three Palio compact models priced between 84,900 yuan (US$10.230) and 109,900 yuan (US$13,241).

The company said it planned to produce 30,000 Palios this year.

Jia earlier predicted China's auto imports would surge up to 200,000 units this year from around 70,000 in 2001.

According to the WTO requirements, China will cut its tariffs on auto imports to 25 per cent by mid-2006.

(China Daily January 30, 2002)

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