Expectations for cheaper cars are especially high for those on a limited budget.

However, domestic carmakers and analysts say the prices are unlikely to fall sharply after the WTO entry mainly because tariffs, which are not the only factor, will decline in a step-by-step manner.

According to Cai Bin, deputy director of the SAIC (Shanghai Automotive Industry Corp) Volkswagen Sales Co, the sales tag on domestic cars includes tariffs, CIF (cost, insurance, freight) prices, value-added and consumption taxes, import licence charges and dealer profits.

Cai's company is in charge of sales for Shanghai Volkswagen, including the Santana and Passat models.

Tariffs will only account for 27 per cent of the price tag for autos, and they will decrease from the current level of 70-80 per cent to 25 per cent by mid-2006, Cai said.

"So the prices will not slump to a level some consumers expect overnight, although they are sure to be on a downward trend after the WTO entry," Cai said yesterday during a WTO and Car Price Forum in Beijing.

He predicted car prices will decrease by only 15-20 per cent over the next five years due to tariff cuts.

China will slash its tariffs on auto imports to 44-68 per cent next year from the current 70-80 per cent.

Domestic cars will maintain their price advantages over imported cars for two years after the WTO entry, he said.

Wu Yingqiu, a senior auto expert in Beijing, told the forum it was "hard to say" domestic carmakers will be overrun by foreign competition resulting from the WTO entry - because they would still be more competitive in after-sales services than foreign rivals over the next two years.

Cai said: "We will continue to take measures in our products' prices and introduce more new models to compete with imported cars."

The price tag of the old Santana car produced by Shanghai Volkswagen, for example, has dropped to 105,000 yuan (US$12,700) from 152,000 yuan (US$18,380) in 1995.

Next April, Shanghai Volkswagen will launch Polo - a new compact car developed by Germany's Volkswagen AG, Cai said.

The company's sales target for Polo cars is 30,000 next year, and the model is expected to be priced between 120,000 yuan (US$14,510) and 140,000 yuan (US$16,930).

Xue Xiang, deputy general manager of the Nanjing-based Jiangsu Nanya Automobile Co, said there is little room for further cuts in domestic economy cars because current prices are basically in line with global prices.

Nanya is now producing Eagle and Unique compact cars at prices of 60,000 yuan (US$7,255) to 70,000 yuan (US$8,460) in co-operation with Italian carmaker Fiat.

Xue said Nanya would launch another new Fiat model - Palio - next month.

"Palio will also target Chinese families," he said.

Su Hui, general manager of the Beijing Asian Games Village Automobile Exchange, called for domestic carmakers to accelerate upgrading of their products as part of efforts to attract more customers and revive the domestic market.

Domestic car sales began to slump in September as a result of consumer spending caution and anticipation of cheaper auto products boosted by the WTO entry. China was admitted into the WTO on November 11 after 15 years of negotiations.

According to statistics from the China Association of Automobile Manufacturers, car sales in October this year decreased by 22.1 per cent to 52,000 units compared with sales in the previous month.

Su said daily car sales in his exchange, one of the largest in Beijing, had dropped to 60-70 units this month from 160-180 units.

A recent survey conducted by the exchange showed that only 8 per cent of consumers planned to buy cars before the end of this year.

(China Daily November 19, 2001)