A sharp drop in the growth of China's vehicle imports has been tipped for the year, with zero growth also a possibility.

It would be "fairly good" if the figure could reach last year's level, said Ding Hongxiang, deputy general manager of the State-run China Trading Centre of Automobile Imports.

Last year, China's automobile imports surged by 35 per cent over the 2002 figure to 171,000 units.

The nation imported 96,780 vehicles in the first six months of this year, up 6.7 per cent from the same period in 2003, according to Ministry of Commerce statistics.

The growth rate is down from 7.5 per cent for the first five months of 2004.

"Import growth will further decline in the second half of this year as more consumers hold off from making purchases due to strong expectations that the prices of imported cars will fall next year due to China's removal of its quota and tariff cuts for imported vehicles," Ding said.

China will remove its quota system and slash its tariffs to 30 per cent in January from the current 37.6 to 34.2 per cent, in line with its World Trade Organization commitments.

"With more main foreign models being produced in China, the share of imports in terms of the total domestic vehicle market this year will not be able to exceed the 4.2 per cent seen last year," he said.

Sales of Chinese-made automobiles rose by 24.15 per cent year-on-year to 2.55 million units during the first half of the year.

Jia Xinguang, chief analyst at the China National Automotive Industry Consulting and Development Corp, predicts that about 180,000 units will be imported during 2004.

"Sales of imported vehicle are also expected to dip due to the expected massive reshuffle of dealers and government's squeeze on car loans," Jia told China Daily.

Detailed regulations for automobile sales networks, which will be much stricter on dealers than ever before, are being discussed and will be released soon.

This year, prices of imported cars have dropped by bigger margins compared to those made in China, as many dealers are slashing prices.

For example, a Mercedes-Benz S350, which retailed for 1.2 million yuan (US$144,900) last year, has fallen to 1.05 million yuan (US$126,800).

So far this year, less than 10 per cent of all car sales in China have been facilitated through bank loans - down from over 30 per cent a year ago, because of tighter government controls.

"Vehicle imports will become more luxury and niche-market orientated as foreign car makers will start producing more of their models, including luxury ones, in China," Ding said. "It means dealers will have less options when it comes to choosing imported models."

BMW has started producing its 3 and 5 series sedans, which have been popular imports in China, late last year at its joint venture in Shenyang, capital of Northeast China's Liaoning Province.

Mercedes-Benz will assemble its C and E-class cars at the beginning of next year at a venture with its parent firm, DaimlerChrysler, in Beijing.

The value of automobile imports during the first half of this year stood at US$2.98 billion, an increase of 20.8 per cent from the same period in 2003, statistics show.

Source: China Daily