FAW-VW fires the first shot in car price war

THE unexpected sales dip in China's auto market has prompted car makers to join a new round of price wars across all market segments.
 
The return of the price wars has ended an upswing in car prices since the beginning of this year, triggered largely by soaring raw material costs.
 
Market observers yesterday said they remained skeptical about whether lowering prices would be helpful in spurring sales. The price reductions have also triggered market concerns the sustained growth of the whole industry could be damaged, which would further erode car makers' already declining profits.
 
FAW-Volkswagen, the flagship venture of Volkswagen AG in China, announced price cuts of 10,000 yuan (US$1,460) to 19,000 yuan on its mainstream models last Wednesday.
 
The price discounts covered the economy sedan Bora and Golf as well as Sagitar mid-class sedan and the Magotan.
 
The price cuts have been widely touted as the first shot in an impending price war among China's mainstream auto makers. It has also fanned market competition ahead of the prime sales season in September and October.
 
FAW-VW's price cuts have been followed by Chang'an Ford Mazda Automobile Co Ltd, which cut the price of its Mondeo mid-to-high class sedan by up to 20,000 yuan, or 12 percent, to enhance its competitiveness against rivals like Toyota's Camry and Honda's Accord.
 
Industry sources said more auto manufacturers are also considering price reductions.
 
"The high inventory and stockpile of spare parts were two main reasons behind FAW-VW's price reduction," said Tong Jiren, an independent auto analyst. "In the following months, more car makers are expected to join in the competition through an industrial-wide price reduction, especially in the economy car sector and profitable mid-class segment."
From:Shanghai Daily

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