GM China Cuts Car Prices Amid Accelerating Price War

BEIJING, March. 7, 2005; General Motors, had slashed prices of two Buick models in China by up to 15 percent to counter a move by Japanese rival Honda Motor, car dealers said Friday.

General Motors Corp.'s main China venture said retail prices on its Buick Regal and Excelle sedans would now start at 203,800 yuan (US$24,625) and 119,800 yuan, respectively. It did not specify previous pricing.

But two dealers said that amounted to as much as a 10 percent discount on the Regal and 14.7 percent on the Excelle — days after Honda began offering sedans at a 7 percent discount, setting off the latest round of discounting to convulse the world’s third-largest vehicle market.

Chinese car prices have headed south for years as foreign automakers ramp up capacity to grab a slice of the fast-growing market, squeezing margins for the likes of Volkswagen.

Global automakers including Ford Motor Co., Nissan Motor Co. Ltd. and Toyota Motor Corp. are investing more than US$13 billion in China to triple annual production to about 6 million cars by 2010.

Discounts are taking on new significance in a decelerating market as the government applies the brakes to slow a racing economy and restricts auto loans, keeping buyers at home.

Government credit curbs last year reduced the growth rate of car sales to 15 percent from almost doubling in 2003, when it was the world’s fastest growing auto market.

Analysts now expect the car market to grow just 10 percent this year after rising 15.2 percent last year to 2.33 million units, which followed a near doubling in 2003. Enditem