Prices of homemade sedans have long been a frequently asked question by consumers who wonder how much room there will be for price decrease.

Sedan prices which used to be buoyant began to drop in 2001 when China joined the WTO and maintained the downward movement consistently since then. Rounds of price cuts have swept nearly all homemade sedans ranging from small and mini models below 50,000 yuan to those worth 200,000 to 300,000 yuan for mid- and high-end market. The price-cut campaigns in 2004 were conducted on such a scale and with such a frequency that have never seen before.

The price of a sedan is normally based on 4 factors: cost, taxes, manufacture's profit and dealer's profit. Carmakers buy 60 percent of components from suppliers or foreign exporters. In recent years, they have been increasing the domestic component supply for their car production.

However, many individual domestic car parts manufacturers, in large quantity but of small scale and investment, can only supply components to one or two carmakers or models, making it difficult to bring costs down for homemade cars.

During the CPC and CPPCC conference last year, there were voices calling for removing car consumption tax designed to discourage car consumption as using a car should not be regarded as luxurious consumption. But this was not adopted.

Enterprises make profits to survive. In car business, in particular, players have to invest heavily and face high risks. Any business in this sector has to input part of its profit as investment to sustain development and growth.

90 percent of sedans currently sold on the domestic market are made by joint ventures. It costs a joint venture 20 to 30 percent higher than the world's level to make a car due to various reasons, including steel imports, parts procurement, taxes and operating costs. And it is too difficult to narrow this gap in the foreseeable future.

During the car exhibition in late April this year, many car producers complained about the rising prices of iron ores, crude oil, rubber and chemicals, and some car parts and components. This has led to the soaring costs of making a car. In this case, there is not much possibility of bold price cuts. Instead, a few models are even likely to be priced higher.

As learned from authoritative sources, profits of domestic carmakers shrank as much as 26 billion yuan over the six months from Jan. to June this year. The sedan sector suffered 60 percent profit plunge compared with the first half of 2004. And an array of carmakers is struggling in loss making.

Experts with China Automobile Technology and Research Center argued that homemade sedans for the mid and low market have been marketed at prices lower than those on the international market. Sedans valued more than 200,000 yuan are mostly priced at a similar level as those on the world market. The situation where neither production capacity expansion nor tax cuts are realized makes it not much possible to see prices of homemade sedans down soon.

By People's Daily Online