HomeAsiaChinese automakers slash prices and offer subsidies in bid to revive consumption

Chinese automakers slash prices and offer subsidies in bid to revive consumption

Chinese automakers are selling their stocks of vehicles, many of them made with imported technology as part of joint ventures with major foreign brands, at deep discounts ahead of a new set of emissions standards, Radio Free Asia has learned. .

The price cuts began earlier this month with a round of deep discounts from the state-owned Dongfeng Motor Group, which makes Citroen, in the central province of Hubei, which was partly subsidized by the local government.

They come after the ruling Chinese Communist Party leader, Xi Jinping, called for sweeping measures to stimulate consumer spending in an attempt to revive the country’s economy.

The move has sparked a price war among other automakers affecting both conventional and electric vehicles ahead of changes to carbon emissions standards that take effect from July 1, people from the company said. industry to Radio Free Asia.

A supplier to FAW-Volkswagen Automobile Co., Ltd. said the company, a joint venture between the FAW Group and Volkswagen Group that makes Audi and Volkswagen cars for sale in China, had launched a 30% discount scheme on its models. Audi, with price cuts of up to 35% over other models.

“The auto industry has experienced rapid capacity expansion over the past 10 years, with an inventory of millions of vehicles,” the person said. “Now there are new rules on carbon emissions, so there is no other way (to get out of this).”

Discounts up to 50% off

He said local governments are subsidizing the sale, with discounts of up to 50% on certain Dongfeng Citroen models.

“For a 200,000 yuan car, the government will subsidize around 50,000 yuan, then the company will subsidize around 50,000 yuan,” the person said. “Such discounts are unprecedented, and others are now following his lead.”

In this Feb. 19, 2017 photo, workers walk past Haval SUV models parked in front of the Great Wall Motors assembly plant in Baoding, north China’s Hebei province. (Andy Wong/AP)

The person predicted that several joint-venture automakers would collapse as a result, including Changan Ford, a 50/50 joint venture between local Changan Automobile and Ford Motor Company of the United States, especially as Changan’s own-brand vehicles are They sold more than those from China. Ford models manufactured.

“Sales volumes of Changan’s new energy vehicles and hybrids and its traditionally powered vehicles have surpassed that of Ford vehicles across the board,” the person said, adding that Changan Ford and Dongfeng Citroen have been laying off large numbers of staff in recent months. .

Another senior person in the auto industry said there is no doubt that the joint venture vehicles are of higher quality, but the government is now supporting new energy vehicles, which are not that difficult to make.

“Why are you driving electric vehicles? It’s partly due to ecological factors, but also because there are certain technological barriers to making diesel engines,” the person said.

chip shortage

He said Chinese automakers are currently struggling to make up for a global shortage of chips for the auto industry, with some making exaggerated claims about their technology.

“There are a lot of forgeries, fraudulent attempts at compensation, in the process, and that is a given,” he said.

An employee in charge of brand promotion at Changan Automobile declined to comment when contacted by Radio Free Asia, while requests to Dongfeng Motor also went unanswered.

Inquiries made to various departments of the China Automobile Association had not received any response at the time of publication.

In this January 22, 2019 photo, a sales representative waits for customers at a luxury car showroom in Beijing, China. (Greg Baker/AFP)

Hubei’s price-cutting campaign for Wuhan-based Dongfeng Motor Group prompted a slew of subsidies across the country, as local governments in Beijing, Tianjin, Shanghai, Zhejiang, Henan, Sichuan, Heilongjiang, Shanxi , Yunnan, Hainan and Guizhou did the same for consumers. subsidies to promote car ownership.

In the central province of Henan, the provincial government said it would subsidize new car purchases to the tune of 5%, while the northern port city of Tianjin pledged to spend 60 million yuan on a similar scheme, while the province Eastern Shandong is offering a 200 million yuan coupon scheme for new car purchases.

To date, more than 30 car brands have joined the price war, with discounts of up to 70,000 yuan offered by Shanghai VW, subsidies of up to 37,000 yuan per vehicle from China FAW, and combined corporate and government subsidies of up to 105,000 yuan. Offered on Jining Dongfeng Peugeot models.

Guangqi Honda Haoying and Accords are being sold at discounts of up to 30,000 yuan, while SAIC Shanghai sells Audi A6L models at discounts of 90,000 yuan, with some Mercedes Benz models discounted as much as 120,000 yuan. Discounts of 40,000 yuan are currently being offered on all Ford electric models.

Financial commentator Si Ling said the move is an attempt to stimulate consumption across the economy, a top priority for ruling Chinese Communist Party leader Xi Jinping as he begins a third term at the helm of a struggling economy. decline in the wake of the unpopular zero. -COVID policy, which ended in December.

However, he said it’s unlikely that people will start buying big-ticket items like cars just yet.

“The State Council has started laying off people, which shows that the Chinese government’s coffers are not as full as before,” Si said. “Many people are thinking about the future, with imperfect coverage for illness, education, pensions, etc.”

“There are a lot of things to worry about, and a lot of people would rather save their money,” he said.

Translated by Luisetta Mudie. Edited by Malcolm Foster.

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