Sales of China-made vehicles climbed 25 percent to 7.22 million units last year, which enabled the country to surpass Japan as the world's second-largest vehicle market. The increase was up from 13.5 percent in 2005.

"Car price cuts failed to squeeze profits last year as most reductions were on older models," Song said. "Carmakers launched many new products which contributed significantly to their sales," Song said.

However, analysts anticipate the sector's profit growth this year will decelerate as a result of slower vehicle sales and bigger price reductions.

Song said the industry is expected to register profit growth of 15 percent this year, while vehicle sales are expected to rise by 20 percent.

Hua Xue, president of cheshi.com.cn, a Beijing-based website for online car sales and price tracking nationwide, said prices will fall by more than 6 percent this year.

"Many carmakers have set lofty sales goals this year inspired by strong performance last year," Hua said. "But the market will not grow as fast as they expect."

"They will have to cut prices, especially in the low and medium segment, to achieve their targets," he said.

(China Daily 02/07/2007 page13) 

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