2010-07-23 13:51

China's vehicle prices may decline steadily in the second half of 2010 because of increasing inventories and pressure by wholesalers to meet sales targets, the country's planning ministry said.

Automakers may join dealers in offering discounts in the fourth quarter, Cheng Xiaodong, an official with the National Development and Reform Commission, said today in a statement. China's car prices fell 1.18 percent in the first half from a year earlier, according to the agency.

Demand in the world's biggest auto market may fall from year-earlier levels in the last six months of 2010, sparking price wars as dealers compete to clear inventories, according to Credit Suisse Group AG and consultant IHS Automotive. Wholesale passenger-car deliveries last month rose at the slowest pace in 15 months as inflation eroded consumers' buying power.

"The high prices we saw last year are long gone," said Yu Bing, an analyst at PingAn Securities Co in Shanghai, who expects a 5 percent price drop for vehicles that cost about 100,000 yuan ($14,750). "Car prices are no doubt coming down."

China's vehicle sales, which have risen every month since February 2009, began growing at a slower rate in April amid increasing prices for consumer goods and signs of a cooling economy.

Automakers are introducing new models at a faster pace in the second half, with an average of three being added every week in July and more than 20 scheduled to come in the next two months, the Development and Reform Commission said.

Price reductions of as much as 5 percent on average are likely, according to Yale Zhang, a Shanghai-based analyst at consultant IHS Automotive.

The Chinese government has been subsidizing rural residents' automobile purchases since last year. The country gave out 7.92 billion yuan to rural residents to help them buy motorcycles and automobiles in the first half, according to the planning agency.

The government also handed out 2.44 billion yuan to subsidize trade-ins of old vehicles during the period, the agency said.