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An intense price war sparked by China's entry into the World Trade Organization will not impede the development potential of China's mini-vehicle market, experts claim.
Jia Xinguang, chief analyst at the China National Automotive Industry Consulting and Development Corp, said the mini-sized vans, sedans and trucks have become popular among Chinese because of their small size, cheap price and flexibility.
Experience from developed countries suggests that demand for vehicles speeds up when a country's per capita gross domestic product (GDP) reaches US$1,000.
China's per capita GDP should reach that level in about two years.
Unlike developed nations, China has large numbers of its population in medium- and low-income groups.
Therefore, the demand for low-priced mini vehicles will be larger than that for medium- and high-priced vehicles, Jia said.
But the price wars of the past year have already lowered the average price of a family minivehicle to between 30,000 yuan and 50,000 yuan (US$3,615 to US$6,025).
Du Fangci, a China Automotive Industry Association official, said the Chinese minivehicle industry has already generated one-third of the country's total auto output.
Five of the top 10 automotive enterprises in China produce minivehicles.
"Chinese mini-vehicle production has maintained an annual growth of 25 per cent in the past 20 years," Du said.
With advanced technology from abroad, China's minivehicles are close to international standards, the official said.
Domestically made minivehicles have also been exported to Southeast Asia and South America.
Some companies, such as the Chongqing Chang'an Company, have even set up overseas workshops.
"Chinese mini-vehicle makers should seize the current opportunity to create more new models suitable for consumers both at home and abroad," Du said.
China needs to map out a new automobile consumption policy so as to encourage domestic demand, said Niu Li, a senior economist with the State Information Centre.
"Although the recent prices for automobiles have dropped vastly, the fees and taxes for consumers are too much," he said.
Jia said fees and taxes for automobile consumption in some Chinese provinces account for about 50 per cent of the automobile prices.
"This was higher than a 15 per cent value-added tax imposed in Germany, a 10 per cent consumption tax and purchasing tax in Japan and a 6 per cent sales tax in the United States," he said.
The most serious problem lying in the industry's further development was that local authorities placed limits on the use of private and mini vehicles, Jia said.
In Guangzhou, the local government did not issue a licence for mini vehicles.
In Shanghai, mini vehicles are not allowed to be driven in major city areas.
(China Daily January 18, 2002)
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