Although sales volumes are rising

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Buyers of some specialty vehicles have already felt the pinch in China. Under the pressure of rising prices for steel and other materials, buyers have been forced to pay more for heavy trucks. Prices for some major truck brands have increased 2 percent upping to around 6,000 yuan -- a rate of increase in line with the rising cost of steel.


According to the China Association of Automobile Manufacturers, domestic production of cars, trucks and buses reached 8.88 million units in 2007, up 22 percent from 2007, while sales rose 21 percent to 8.79 million units.
This year’s rate of decline may shrink to between 2 percent and 3 percent,adidas f50, an analyst from Citic Securities, Li Chunbo, told Caijing. And statistics from the National Development and Reform Commission indicate that the rate of price decline is slowing. Although China’s average auto price was down 3.17 percent in February year-on-year, it was 0.13 percent above the average price in January.
Compared with trucks, industry insiders think passenger vehicle makers have less room for raising prices due to the highly competitive market. However, manufacturers may seek other ways to relieve cost pressures,chaussure louboutin pas cher, such as cutting out preferential pricing, adjusting vehicle accessories, or selling pricier models.
Meanwhile, prices are also on the minds of industry leaders. Some expect auto prices to climb due to rising costs for raw materials and labor, but others say maturing of technology and the market environment should push prices lower.
Although sales volumes are rising, the market has been worrying about manufacturer profits, basing fears on rising prices for products made of steel -- the key material for automobiles.
Yao also thinks the growth rate for profits in China’s auto industry will fall dramatically in 2008 but slow in 2009.


By staff reporter Ouyang Changzheng



Production of passenger vehicles alone topped 6.38 million units, up 21 percent. Sales also rose 21 percent reaching 6.29 million in 2007 compared with the previous year.
From dealer showrooms to factory floors, cost is this year’s buzzword for China’s increasingly price-pressured automotive industry.
New-car dealers are trying to convince shoppers to buy now, arguing that prices soon will start climbing, even though in fact average auto prices have been falling in China for years.
Excess Capacity
Fitch analyst Kong Lei told Caijing that the growth rate of China's auto industry should drop to 15 percent in 2008,franklin marshall, from 22 percent last year, due to negative factors such as rising costs, a slowing economy, and currency appreciation.
As sales slow and production expansions tail off, the capacity utilization of China’s auto industry may drop even further,franklin et marshall, said Yao Hongguang of United Securities. From an investment perspective, Yao forecasts decreasing investments in joint ventures, while investments in home-grown brands will grow.


Rising steel prices and excess capacity are hurting profits for China's auto companies and could end the trend of falling prices that's spoiled buyers.




A recent newspaper survey found only 30 percent of respondents expect higher auto prices, although the same percentage said price hikes would definitely affect their car-buying decisions.
Disappointing Results



However, in the long run, the industry still has room to develop. Indeed, Kong expects this year’s auto production in China to reach a new record of 10 million units.

In addition to increasing material costs, excess capacity also threatens auto manufacturers, since demand has been hurt by high oil prices and an eclipsing wealth effect on the Chinese stock market.
SAIC officials said a major challenge for the domestic auto industry is inefficiency linked to capacity utilization, not the rising cost of raw materials. The company expects a reshuffle in the industry within two or three years.

An analysis by Sinolink Securities showed that the overall cost increase in steel products for China’s auto industry will boost expenses by nearly 11 billion yuan this year. Meanwhile,adidas foot, the average cost of a single vehicle is expected to rise 1 percent from the 2007 level. Taking the worst hit will be heavy and light trucks, which are most affected by rising steel prices.



In addition to the increasing material costs, rising labor costs also have shadowed auto manufacturer’s profits. One of China’s major bus manufacturers, Yutong Group, expects its wage costs to rise 30 percent in 2008. Private auto manufacturer, Geely,louboutin pas cher, told Caijing that the company may move its production line abroad due to rising costs at home.
Affected by rising prices for iron ore,adidas football chaussures, major domestic steelmakers including Baosteel and Wuhan Iron and Steel raised factory prices in April. Wuhan’s cold rolled sheet for automobiles rose in price by up to 700 yuan, while zinc plate prices climbed 700 yuan, and hot-rolled steel plate prices jumped up to 400 yuan. Market watchers expect the average price of steel products will climb 10 percent this year compared with 2007.
China’s major auto manufacturers with stocks on the A-share market released disappointing annual reports for 2007, missing market expectations. Share prices of SAIC Motor,polo ralph lauren pas cher, Changan Automotive and FAW Car have been sliding.
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