China's vehicle output growth will slow down this year from the explosive levels it experienced in the last two years, according to an industry monitoring organization.

Vehicle output is expected to total 5.1 to 5.34 million units this year,Slow-down in Vehicle Output Pace Expected
 an increase of some 20 percent from last year, Zhu Yiping, a spokesperson from the China Association of Automobile Manufacturers (CAAM), said Wednesday.

That's down from the 35 percent growth rate seen in 2003 and 2002.

Predicted output this year will include 2.5 to 2.62 million passenger cars, 1.31 to 1.37 million trucks and 1.29 to 1.35 million buses, Zhu said.

"The vehicle market will fluctuate periodically, like the stock market, and will be affected by many factors," she told China Daily.

"We cannot expect the vehicle market to maintain explosive growth for many years," she said.

Last year, total vehicle output reached 4,443,700 units, an increase of 35.20 percent from 2002, according to statistics from the CAAM.

The output enabled China to dwarf Germany and become the world's third largest automobile producer after the United States and Japan.

"Passenger cars will continue to lead the total vehicle output growth this year with increasing individual buyers, but truck and buses will be affected by many uncertainties in closely related sectors, such as infrastructure and tourism,"Zhu said.

"If SARS (severe acute respiratory syndrome) spread again in China this year, the tourism sector would drop in the mire. You can imagine what it would mean for bus output growth," she added.

Passenger car output in China surged 83.25 percent year-on-year to 2,018,900 units last year, statistics indicated.

Truck output stood at 1,229,600 units last year, an increase of 10.04 percent.

Bus output rose by 11.94 percent to 1,195,200 units last year.

"The growth rate for passenger car output will be nearly 50 percent this year and that of truck and bus output will be less than 10 percent this year," said Jia Xinguang, an analyst with the China National Automotive Industry Consulting and Development Corp.

But one important factor affecting passenger car output growth is that many people will probably delay buying with cheaper imported cars expected next year, Jia said.

China's car imports next year will increase over this year as a result of the removal of import quotas and further tariff cuts in 2005, due to the nation's commitments to the World Trade Organization.

Total sales of domestically-made vehicles reached 4,390,800 units last year, an increase of 34.21 percent from the previous year, according to statistics.

Sales of passenger cars made in China jumped by 75.28 percent year-on-year to 1,971,600 units last year.

Truck and bus sales grew by 10.35 percent and 15.15 percent to 1,211,400 units and 1,207,800 units respectively last year.

Sales in December, especially of passenger cars, increased dramatically over the same period in 2002 as a result of manufacturers" strengthened efforts to reduce stock, Zhu said.

Total vehicle sales last month increased by 58.35 percent year-on-year to 456,500 units, statistics indicate.

Passenger car sales in December reached a monthly record of 227,300 units, up 111.48 percent from a year earlier.

"Manufacturers will further cut prices to deal with mounting competition, especially in the passenger car segment,"Zhu said.

In the first two weeks of 2004, prices on almost 10 models have been slashed, such as the Sail from Shanghai General Motors, the Paladin from Zhengzhou Nissan and the Gazelle from Chang'an Suzuki.

"In the mini car segment, the price is already low by international standards, and there won't be much room for price cuts. But in other (medium and high) segments, the competition will be very tough with the introduction of many new models," said Geoff Liu with Automotive Resources Asia, an industry consulting firm.

Tens of new models will be launched in China this year but they will likely feel the effects of lower prices.

"The profit margin of domestic vehicle manufacturers will further decline as a result of price cuts,"Zhu said.

Currently, the average profit margin only stands at 8 to 9 percent, much lower than 20 to 30 percent as many analysts claim, she stressed.

According to statistics, sales from five domestic automakers exceeded 300,000 units last year.

These automakers "First Automotive Works Corp (FAW), Shanghai Automotive Industry Corp (SAIC), Dongfeng Motor Corp, Chang'an Motor Corp and Beijing Automotive Industry Holding Corp "accounted for 64.98 percent of total sales of domestically-made vehicles.

(China Daily January 15, 2004)