The outlook for China's once sizzling car market has cooled, prompting both foreign and domestic carmakers to scramble to undercut their competitors by cutting prices by up to 20 percent.

Both production and sales of vehicles in China are forecast to rise about 10 percent in 2005 to about 5.6 million units, domestic media reported Friday, citing the China Association of Automobile Manufacturers.

The association reported that China's total vehicle output climbed 14 percent over a year earlier to 5 million units, with passenger car production rising 12 percent to 2.3 million units. Total vehicle sales were up 15 percent, also at 5 million units, the Xinhua News Agency reported.

Though still robust by international standards, that growth outlook is anemic compared with the 75 percent jump in passenger car sales in 2003.

The fervor driving soaring sales over the past few years has languished amid government-ordered curbs on bank lending. With automakers slashing prices, many consumers are thought to be waiting for prices to drop further.

Toyota Motor Co. recently announced cuts of about 20,000 yuan (US$2,400) on 19 different versions of its Corolla midsize sedans and Vios subcompacts made in China. The price cuts amount to up to about 20 percent of sticker prices.

Last week, German luxury automaker BMW AG announced it had cut prices on some China-made passenger vehicles by up to 50,000 yuan to 100,000 yuan.

BMW's sales almost tripled in 2003. But in the first ten months of 2004, sales of its BMW and Mini vehicles, climbed only 12 percent, to 13,461. Sales of locally made vehicles totaled 8,660, according to domestic media reports.

Paul Nolasco, a Toyota spokesman in Tokyo, said the Japanese automaker's price cuts were spurred by calls from consumers for lower prices and by the company's growing ability to cut costs as its production ventures in China mature.

But he said the company did not plan any further significant price cuts for 2005.

The slowdown in sales has been "a drastic change, to be sure," Nolasco said. "But 15 percent growth in many markets would be considered absolutely phenomenal."

Average prices in the domestic car market fell by about 13 percent last year and by about 8 percent in 2003, Xinhua reported.

The China Association of Automobile Manufacturers forecasts that passenger car output and sales in 2005 will climb 12 percent over last year, to 2.6 million units, it said.

Association spokeswoman Zhu Yiping characterized the frenzied growth of recent years as "explosive" and an anomaly.

"Last year's growth and the growth expected this year are smooth and reasonable, although they are much lower than the figures in 2003 and 2002," the report quoted Zhu as saying.

"The industry will remain on a steady and healthy track if the domestic auto market grows by more than 10 percent annually in coming years," she said.

Still, with capacity steadily rising and sales growth flagging, inventories are growing. Chinese automakers and dealers have total inventories of more than 500,000 cars.

(Shenzhen Daily January 17, 2005)