The year of 2005 will a considerable fall of prices of sedans China. This forecast was made by Xu Changming, director of Economic Consultancy Office of the State Information Center at the 3rd Auto Culture Festival in Shandong recently.

He predicted a sweeping price decline in China's sedan market next year. But he also believed things would turn better for the sedan market in 2005.

His logics is based on the great pressure of the price cut potential of imported cars on home-made sedans. In 2005, China will decrease its tariff of import limited cars to 30 percent and the duties will be 7.6 percentage points and 4.2 percentage points lower for cars with a displacement above and below 3 liters respectively.

Theoretically, every one percentage point of tariff decline drags auto prices down by 0.3 to 0.5 percentage points.

In addition to that, he said, another barrier to sedan imports which played a significant role from 2002 to 2003, would be lifted. This, he thought, would hit the car prices even harder.

He held that imported cars would swarm into the Chinese market, which would be sold at lower prices than before.

There is another factor, albeit still uncertain it is now, that we cannot play down. He noted that a stronger renminbi next year, if it would be, would bring prices of imported cars down even further.

In Xu's analyses, the competition which is getting more intensive day by day for home-made sedans underpins the pressure of a price plunge on the domestic market for sedans for private use in 2005.

He took the case in 2002 as an example when price cuts contributed 43 percent of the increase of auto sales. The price cuts helped to sell 300,000 units of cars in 2003 when 800,000 more cars were sold for the whole year.

He concluded that the prices of home-made sedans would go down even more drastically than ever as the competition got more fiercely.

By People's Daily Online