Domestic vehicle sales are forecasted to be brisk during the first quarter of this year as a result of a slew of price cuts by automakers in China.

Sales during the quarter are expected to increase by at least 15 per cent from the same time last year, said Jia Xinguang, chief analyst of the China National Automotive Industry Consultation and Development Corp.

"The rosy forecast is based on a jump in the sales during the first two months of this year powered by price cuts,'' Jia said Wednesday.

Rise in Sales and Output

Statistics from China Association of Automobile Manufacturers said automakers in China sold 346,000 units from January to February, an increase of 11.2 per cent over the same period last year.

Output rose by 15.7 per cent year-on-year to 369,800 units during the first two months of this year, the statistics also showed.

"The domestic market is maintaining an upbeat growth momentum, although sales in February declined by 15.0 per cent from January mainly because of the Spring Festival holiday,'' said Zhu Yiping, an official with the association.

Sales in February amounted to 159,000 units, Zhu said.

Price Cuts Contribute a Lot to Sales

Su Hui, general manager of the Beijing Asian Games Village Automobile Exchange, said price cuts played a "critical role'' in jacking up sales as prices still weigh most heavily for consumers.

"Consumer sentiment is on the upswing thanks to price cuts,'' Su said.

More than 7,700 vehicles were sold in his auto exchange, one of the largest in Beijing, during the first two months of this year, he said. Vehicle prices on the exchange, including those for imported cars, have declined by 4 per cent on average.

Major carmakers in China, including the Tianjin Automotive Industry Corp, Shanghai General Motors, Shanghai Volkswagen and Chongqing-based Chang'an Motor Corp, have cut prices of their products in the struggle for market shares.

In January, the Tianjin firm lowered prices on its 24 Xiali compact models by 9,000-23,000 yuan (US$1,084-2,771) in January.

Shanghai General Motors also launched a 5,000-30,000 yuan (US$603-3,614) price cut for its 1.6-litre Sail and 2.5-litre Buick sedans.

Automakers Benefit for Price Cuts

Automakers have benefited much for their price cuts.

A spokesperson from Shanghai General Motors said the company sold 5,046 vehicles in February, up from 2,877 units in January.

"We believe our sales will be much better in March,'' the spokesperson said.

Su said the sales were partly driven by new products on the market since the end of last year, such as the Sail small recreational vehicle from Shanghai General Motors and the Palio compact car from the Nanjing Fiat Automobile Co.

"The increasing sales are also the effects of improvements in auto consumption, such as a sharp cut in the vehicle purchasing tax,'' Su said.

The vehicle purchasing tax has decreased to 5 per cent from the previous 10 per cent.

Jia said the robust sales signaled an improving product mix of China's auto industry in recent years.

Currently, passenger cars, buses and trucks account for one-third of total domestic vehicle production, Jia said. Trucks controlled 70 per cent of the production in early 1990s.

During the first two months of this year, passenger car output amounted to 100,425 units, an increase of 8.9 per cent from one year earlier, said the auto association.

Passenger car sales during the period increased by 13.5 per cent year-on-year to 106,330 units.

(People's Daily March 21, 2002)