The National Bureau of Statistics yesterday sharply reduced its forecast for automobile output in China this year as a result of sluggish domestic car sales.

The bureau's output forecast has declined to 2.39 million cars this year down from 2.82 million, said Jiang Yuan, an official from the bureau.

Forecasts for the car output growth rate this year have been lowered to 18 percent from 40 percent, Jiang said.

The nation's car output surged by 83 percent to 2.02 million units last year.

"The reduction on car output forecast this year is based on adverse car market conditions," he said.

Car output and sales in China stand at 171,900 units and 170,300 units in the first eight months of this year, up only 0.02 percent and 0.23 percent from a year earlier respectively.

Accumulated car output in China grew by 26.2 percent year-on-year to 1.62 million units during the period with sales reaching 1.51 million units, up 23.7 percent.

Output and sales growth rates were down from 83 percent and 75 percent respectively last year.

The growth plunge mainly resulted from government controls on car loans, soaring oil prices and consumers' strong anticipation of further price cuts.

"Most car makers in China cannot fulfill sales targets set at the beginning of this year," Jiang said.

"Our directorate will adjust our sales target this year (from 462,000 cars set at the beginning of the year) in line with changes on the domestic market," said an official from Volkswagen's car venture in Shanghai, who asked not to be named.

The venture, the biggest car maker in China, sold 26,000 cars in August.

At least 30 percent of car production capacity in China has been unused during the past two months.

Manufacturers now have inventories of more than 100,000 cars and dealers have many more.

Analysts say manufacturers will have to continue to cut prices to boost lacklustre sales.

Prices of almost all home-made cars have declined over the past eight months.

Oversupply in the domestic car market will keep climbing as many manufacturers are building new production capacity, analysts said.

Investment bank JP Morgan predicted that car output will be 23 percent more than sales in China next year, up from 11 percent expected this year.

Volkswagen plans to double its annual production capacity in China to 1.6 million cars in 2008.

(China Daily September 16, 2004)