Suzuki's China venture slashes prices-Will this be a worldwide trend?

SHANGHAI A Reuters story published in Japaan Today today said that the China venture of Japan's Suzuki Motor Corp said on Friday it slashed prices of all its 19 products by up to 20%, joining a resurgent price war due to pressure from cheaper imports.

Chongqing Changan Suzuki Automobile Co ordered a nationwide price reduction for its entire Alto and Lingyang small car series starting Friday, with the biggest cut of 20,000 yuan ($2,417) for the one-liter engine Lingyang, a spokesman for the venture said.

"The cut is steep and large-scale, and will return a large part of our profits to buyers. As a result, our company will, in principle, not cut prices again for the rest of this year," the spokesman said.

The venture, 51% owned by Shenzhen-listed Chongqing Changan Automobile Co, has an annual capacity of 150,000 cars.

The listed firm's hard currency B shares available to foreigners closed unchanged at HK$2.67 on Friday, unaffected by news of the price cut, brokers said.

Several Chinese auto makers have trimmed prices this year to fend off intensifying competition from a surge in cheaper imports expected to hit sales of locally-made cars.

Analysts said China's car sales are likely to jump seven to 10% to 750,000 to 800,000 units in 2002, including more purchases of imported cars, from around 700,000 units for 2001.

The government cut tariffs on car imports by about one third to 40% to 50% this year to honour its commitments to the WTO, of which it formally became a member on Dec 11.

In a WTO agreement with the United States late in 1999, China promised to cut tariffs of imported sedan cars to 25% five years after joining the trade body.

First Automotive Works (FAW), China's leading auto group, last week cut car prices by an average of 30,000 yuan ($3,625). Prices for four models of FAW's Red Flag cars had been cut to 219,000 yuan to 319,800 yuan each.

Tianjin Automotive Xiali Co cut the price of one of its key compact car models by nearly 20%. Prices for cars made by Hainan Mazdas Auto had also been slashed by about 10,000 yuan to 20,000 yuan each.

A report by the official Xinhua news agency said on Thursday daily sales of Tianjin Auto soared nine times after its price cut, adding that the latest price cuts by big names would help car makers clean out excess stocks.

China's auto industry has been plagued by raging price wars between dozens of tiny domestic producers.

All China's vehicle makers are licensed but at least one-third are not making sedan cars at all, and only a handful have an annual capacity of more than 10,000 units, analysts said.

Auto makers are also scrambling to put out new models this year to win a slice of the fast-growing but crowded car market.

Volkswagen 's Shanghai venture, which holds 40% of China's passenger car market, plans to launch its Polo hatchback in the country in April. Honda Motor also plans to roll out subcompacts in 2003.

General Motors' Shanghai joint venture launched the Buick Sail family car last May and grabbed a 20% share of the market, the U.S. firm has said. (Reuters News)