Foreign carmakers in China are set to cut prices of models for this market

Article by Christian Andrei, on February 3, 2011

General Motors, Honda and Nissan Motor Co. are all set to conquer Chinese consumers who would buy their products over the belief that foreign technology offers a higher level of comfort, better fuel efficiency and a lower cost of maintenance. Last year, the incomes in China (the world's biggest car market) increased by nearly 11%.

For instance, a tour guide named Chen Libin has been eagerly waiting to replace his Xiali A+ sedan with any of GM and Honda’s vehicles intended exclusively for the Chinese market. Chen is ready to pay up to 80,000 yuan ($12,153) on a car that he will drive 300 kilometers (186 miles) each day around the Inner Mongolia grasslands.

He explained that the models available at domestic automakers like Tianjin FAW Xiali Automobile Co. begin to break down only after two years, while drivers don’t face major problems with foreign cars for at least five years.

Chen added that he is considering GM's Baojun and Honda's Li Nian marques. John Zeng, an industry analyst at J.D. Power & Associates in Shanghai, said that the more affordable nameplates from the global carmakers will enable them to compete on price against local manufacturers without diluting their cache among Chinese buyers.

Zeng calls it a “win-win situation.” He explained that consumers pay less for foreign-brand technology, and the foreign carmakers benefit from a climb in sales volume without compromising their brand image.

Leah Jiang, an analyst with Macquarie Research Ltd. in Shanghai, said that the “low-budget cars” from the foreign carmakers will feature older model platforms and offer a few extra features.

Koji Endo, an auto analyst at Advanced Research Japan in Tokyo, said that to pull prices down to as low as 50,000 yuan, the following features may be excluded: anti-lock brakes, automatic air-conditioning and reclining seats. [via autonews - sub. required]

Topics: china

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