(China Daily)
Updated: 2007-10-10 09:52

A new bout of price battles in China's car market, the second-biggest in the world, has broken out following South Korean carmaker Hyundai Motor Co's aggressive price cuts on its locally-made models last month.

Hyundai's joint venture with Beijing Automotive Industry Corp slashed prices of the subcompact Accent, the compact Elantra and mid-sized Sonata by 5,000 to 16,000 yuan to buck a downward trend in its sales this year.

Under attack from competition, January-to-August sales at the venture, which also makes the Tucson sports utility vehicle (SUV), plunged 20 percent from a year ago to 146,001 units, ranking eighth in the passenger car sector in China, according to industry data

Hyundai's move has ignited a new round of price wars, which will be "awfully acute" this month, the seasonal peak car sales period in China, analysts said.

Hua Xue, chief executive officer of cheshi.com.cn, a Beijing-based portal tracking nationwide car prices, said: "Other carmakers will have to follow suit to lure increasingly sophisticated Chinese buyers."

As a result, domestic car prices will tumble by as much as 6.5 percent in December from January, a quicker pace than 5.6 percent last year, he said.

Prices in August dropped by 3.6 percent from January due to earlier price contests, he said.

According to market intelligence, Shanghai GM, a tie-up between General Motors Corp and SAIC Motor Co, will possibly launch a major price cut for the compact Buick Excelle - its best seller - to fight against the Hyundai venture.

Analysts said Shanghai GM, the third-biggest passenger car producer in China, will have to cut prices to achieve its lofty 2007 sales target as its growth this year has slowed sharply.

Sales in the first eight months hit 294,600 units, up 13.7 percent. The growth rate was 23 percent last year.

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