China's auto market is presently undergoing dramatic change. The market was once just government authorities and taxi fleets, but now the number of private customers is increasing rapidly.

Domestic and international automobile makers are now engaged in an increasingly harsh competition war in terms of both price and production to grab a larger market share of China, as the country gets ready to enter the World Trade Organization (WTO), meaning free trade and increased imports of cheaper modern cars.

This year, the Chinese people face greater purchasing choice as various car models, luxury and economy, have rolled off the assembly lines since last year.

In January 2001, the Beijing Asian Games Village Automobile Exchange, the largest auto selling center in the capital, registered a 78 percent increase in new car buyers of domestic models, a historical high. Among the Chinese-made vehicles, the Songhuajiang and Alto models are well received.

Experts forecast that, this year, about 600,000 domestic-made cars will be sold. Cars priced at below 90,000 yuan will likely account for 25 percent of the total; those priced between 90,000 to 150,000 yuan, 35 percent; 150,000 to 200,000 yuan, 20 percent; 200,000 to 300,000 yuan, 12 percent; cars priced at more than 300,000 yuan will occupy 8 percent.

In 2001, more China-made cars like Guangzhou’s Honda and Passat will be manufactured. Chinese car manufacturers will compete with not only foreign giants, but also their domestic counterparts.

Yet, it is too early to estimate how much of a market share that the Chinese made cars can claim against foreign auto giants, since their functions and price are not that clear so far.

According to a Sino-US landmark agreement on China's accession to the WTO clinched November 1999, China will cut tariffs on auto imports from the current 80 to 100 percent level to 25 percent by mid-2006. This means price cuts for imported cars, a challenge to domestic automakers.

Foreign automobile makers will grab every chance they can to introduce their products and claim a lion’s share in China, the world's largest potential market with 1.2 billion populations. In many overseas markets, firms will press ahead with a localization policy for parts, production and employees.

This year will see more European made vehicles imported to China since they are relatively cheaper than Japanese and US-made cars, because of the fact that the rate of the Euro and German Mark against US dollar is not as stable as the renminbi against US dollar.

In addition, imported cars will see an upturn in numbers as China relaxes import controls ahead of its pending WTO entry. Since January 1 this year, the country has lowered its hefty tariffs somewhat, partially removing a key incentive for car smuggling.

Besides new cars, some Chinese have begun to focus on used cars. By the end of last year, the used-car market was slack since many adopted a wait-and-see attitude. Chinese consumers also hesitated to buy with so many economy cars coming off the assembly lines. With many new-model economy cars failing to meet consumer expectations, analysts predict brisker used car sales this year.

(CIIC 02/22/2001)