Automakers cut prices, output as growth slows
China's auto sales growth is slowing to a "new normal" and automakers are trimming prices to sustain demand.
BMW will reduce production in the quarter that began this month and has cut prices on some models to adjust to the trend, said Karsten Engel, the automaker's China chief.
Ford Motor Co. is seeing some pricing pressure in China, according to CEO Mark Fields.
Volkswagen AG and other carmakers have cut prices in China by as much as 10 percent in recent weeks, Bernstein Research said in a report Monday. The Shanghai auto show starting this week will be marked by discussions about further price cuts and arguments with dealers about sales targets as growth slows, according to the note.
Biggest market
"China is the single most important determinant of auto industry earnings," Bernstein Research analyst Max Warburton wrote in the report. "BMW is the only OEM to have warned explicitly about China so far, but we expect others to follow."
Vehicle sales in China are forecast to expand 7 percent this year, less than half the pace in 2013. VW won't beat the industry sales growth this year because it's missing out on a surge in demand for budget-priced SUVs and minivans, said Jochem Heizmann, the automaker's China chief, on Sunday in Shanghai.
Rising incomes and low ownership rates helped make China the largest auto market in the world in 2009, surpassing the U.S. at a time when the American economy was mired in recession.
With Europe also in the doldrums and Japan facing a shrinking population, global automakers looked to China as a source of growth.
Domestic and foreign-based carmakers are building more factories in China than anywhere else, a construction binge that risks hurting margins in what remains one of the world's most profitable vehicle markets.
Price war
Mass-market brands have been affected by the increasing number of cities putting in place registration caps to combat pollution, while a campaign against corruption and extravagance has crimped sales of luxury cars.
"We tended to talk about China as an emerging market, and what we're seeing now are actions in the marketplace which are more like a developed market," Ford's Fields told reporters on the sidelines of the show Monday.
Honda is feeling the most pressure to trim prices in the midsize sedan segment and offering discounts of about 5 percent, said Seiji Kuraishi, chief of the company's China unit.
Lexus is cutting prices by 7 percent, though the reductions vary by model, said Tetsuya Ezumi, executive vice president for China.
A price war will become the norm in China, according to BAIC Motor Corp., which has joint-venture partnerships with Hyundai Motor Co. and Daimler AG.
"It's like walking on a single-plank bridge," said Liu Yu, chief of BAIC's sales unit, in an interview. "Fights will go on until the end."
Ford Motor Co. is seeing some pricing pressure in China, according to CEO Mark Fields.
Volkswagen AG and other carmakers have cut prices in China by as much as 10 percent in recent weeks, Bernstein Research said in a report Monday. The Shanghai auto show starting this week will be marked by discussions about further price cuts and arguments with dealers about sales targets as growth slows, according to the note.
Biggest market
"China is the single most important determinant of auto industry earnings," Bernstein Research analyst Max Warburton wrote in the report. "BMW is the only OEM to have warned explicitly about China so far, but we expect others to follow."
Vehicle sales in China are forecast to expand 7 percent this year, less than half the pace in 2013. VW won't beat the industry sales growth this year because it's missing out on a surge in demand for budget-priced SUVs and minivans, said Jochem Heizmann, the automaker's China chief, on Sunday in Shanghai.
Rising incomes and low ownership rates helped make China the largest auto market in the world in 2009, surpassing the U.S. at a time when the American economy was mired in recession.
With Europe also in the doldrums and Japan facing a shrinking population, global automakers looked to China as a source of growth.
Domestic and foreign-based carmakers are building more factories in China than anywhere else, a construction binge that risks hurting margins in what remains one of the world's most profitable vehicle markets.
Price war
Mass-market brands have been affected by the increasing number of cities putting in place registration caps to combat pollution, while a campaign against corruption and extravagance has crimped sales of luxury cars.
"We tended to talk about China as an emerging market, and what we're seeing now are actions in the marketplace which are more like a developed market," Ford's Fields told reporters on the sidelines of the show Monday.
Honda is feeling the most pressure to trim prices in the midsize sedan segment and offering discounts of about 5 percent, said Seiji Kuraishi, chief of the company's China unit.
Lexus is cutting prices by 7 percent, though the reductions vary by model, said Tetsuya Ezumi, executive vice president for China.
A price war will become the norm in China, according to BAIC Motor Corp., which has joint-venture partnerships with Hyundai Motor Co. and Daimler AG.
"It's like walking on a single-plank bridge," said Liu Yu, chief of BAIC's sales unit, in an interview. "Fights will go on until the end."
