Volkswagen slashes car prices in China
By Gong Zhengzheng (China Daily)
Updated: 2004-06-18 09:38

French carmaker PSA Peugeot Citreon's joint venture in Central China's Hubei Province said to China Daily yesterday night that it is to cut price of Citroen Elysee sedan by 10,000-12,000 yuan (US$1,210-1,449) today.

"Volkswagen's price cut is not unexpected for us," said an official from the French joint venture.

"Price is one of the biggest factors affecting car sales in China now. Manufacturers seems to have no better ways than price cuts to boost sales," said Jia Xinguang, chief analyst with the China National Automotive Industry Consulting and Development Corp.

"Manufacturers now cannot have a big market share depending on only one or two new models as there are so many new products launched every year."

Car prices in China remain much higher than in developed markets. Carmakers in China are blamed for enjoying large profit margins.

"Our price cut has been paying off with steady sales growth," said Huang Huaqiong, public relations manager at Shanghai GM, General Motor's joint venture.

Shanghai GM's sales surged by 99.2 per cent year-on-year to 117,279 vehicles during the first five months of this year.

The venture has lifted its sales target for the full year to 300,000 vehicles from 285,000 units.

"Volkswagen should further adjust its strategy of marketing, sales and new product introduction in China in line with the latest development of the local market to protect its market share," Zhang said.

Volkswagen sold 697,000 cars in China last year, accounting for 30.8 per cent of the total domestic passenger car market. But the ratio was down from almost 50 per cent in 2001.

"However, it will be very difficult for Volkswagen to maintain its current market share in China as all the other auto giants are increasing their efforts. Twenty-five per cent will be a decent slice of the market for it by 2008."