Many automakers experienced sales declines in April compared with March this year, triggering great anxiety about China's auto market in the future.

The soaring consumer price index (CPI) and slowing world economic growth bring too many uncertainties to China's auto market in the second half of this year, according to many automaker executives like Dongfeng Nissan vice general manager Ren Yong and Dongfeng Honda executive vice president Liu Yuhe, at the Beijing Auto Show in April.

Auto sales in the first two months of this year were stable, but in March, growth in the retail market nearly stopped, the China Business News quoted an automaker's general manager in charge of marketing as saying.

Due to CPI growth, auto price has been a hot topic among consumers. A survey conducted by Sinotrust, a leading domestic auto research firm, 71.6 percent of consumers surveyed don't want to see auto price hikes in 2008, 13.6 percent say price hikes will occur, and the remaining 14.7 percent say they will 'wait and see.'

But Li Chunrong, vice president of Dongfeng Passenger Vehicle Company, said China's auto market will continue to grow as Chinese economy's upward trend continues.

Latest figures from the price supervision center under the National Development and Reform Commission (NDRC) suggested Chinese domestically manufactured vehicle prices edged up 0.15 percent in March month-on-month, but down 3.17 percent year on year.

Cheng Xiaodong from the supervision center analyzed as competition in the market is heating up and expanding production capacities, auto prices will go down gradually.

The NDRC predicted most automakers will pull down products costs through integration and asset restructuring.

According to Cheng, the second quarter is the off-season for the auto market and consumers are more willing to wait and see. But the Beijing Auto Show in April brought many new auto models to Chinese consumers who will see diversified choices, intensifying the competition.

Meanwhile, the appreciation of the yuan, strong interest rate hike expectations, and fuel tax system reform will impact vehicle consumption plans, pulling down auto prices indirectly.

A car industry research report jointly released by Chinese authorities such as the NDRC and the Ministry of Commerce also echoed the opinion that the car market would be dominated by price reductions despite rising production costs.

But automakers have hiked their prices to offset rising labor and raw material prices. Chery Auto raised its price by three percent before the Beijing Auto Show, and Jianghuai Auto subsequently also added 5,000 yuan to all its vehicle models.

Automakers without price hike plans count on using other means to survive in the market.

"In addition to directly raising prices, making higher priced new models is another option," said Xu Liuping, chairman of Changan Automotive Group.

Xu added that prices of some newly-released auto models are about 1,000 to 2,000 yuan higher than expectations, a means to offset rising costs.

"The price of small- and medium-displacement vehicles has reached their bottom line and will be kept stable this year," said Wang Wei, vice general manager of Changan Suzuki Automobile Co Ltd, adding some of small vehicles might see price hikes this year.

It's not strange at all the average costs on each vehicle will increase by 1,500 yuan to 3,000 yuan, said Rao Da, secretary-general of the Union of National Passenger Car Market Information.

Jia Xinguang, an independent auto analyst, said if inflation continues, automaker won't be able to keep holding their tongues on the price issue. The economical vehicle niche will be the first affected.

(Chinadaily.com.cn May 7, 2008)