Chinese domestic automakers’ profit suffered from joint-venture’s price reduction

Chinese domestic automakers are encountered with a big challenge for losing their low-price advantage when joint-ventures released official price reduction to alleviate their sales slump in the general downturn in Chinese market.

The general recession in Chinese car market brought a development opportunity to Chinese domestic automakers. The Chinese consumers, who had invested much of their money into the soaring share market, preferred to buy domestic brand cars, which cost them much less money than joint-venture brand cars do. Therefore, domestic brand cars sold well while the joint-ventures were troubled with sales slide in the first five months of this year.

And the preferential situation for domestic automakers changed when a number of joint-venture automakers had to lower their official price since April amid the challenging Chinese market recession. Then the domestic automakers struggled to lower their car selling price under the great pressure.

For example, Great Wall Motors’ Haval, the top-selling SUV in China, offered Chinese consumers much discount. One, who purchase Haval H6 (sports) or Haval H2, can respectively obtain a discount of 6,000 CNY and 5,000 CNY. Besides, if the consumer intended to buy the new car to replace his five-year-old car or even older one, he can enjoy a subsidy of 1,000 CNY from the automaker. A dealer of Great Wall Motors told the reporter that it was the first time that the company released such great discount.

These two models sold very well, with Haval H6 sold 30032 units in May. On the other hand, Great Wall Motors’ sedans were experiencing sales slide. Therefore, in order to offset the sales slide in sedans, Great Wall Motors actively promoted the sales of its SUV by lowering the price, which indicates that Great Wall Motors like many other domestic automakers are under a lot of pressure.

Actually, SAIC is the first domestic car manufacture to lower selling price following the general price reduction of joint-ventures. The average price reduction of SAIC Roewe and MG approached ten thousand CNY. Besides, the discount for Roewe 950 exceeded twenty thousand CNY.

It is a tough period for domestic brands in the second half of the year for they didn’t have the strength to fight in price reduction with joint-ventures. And most of the automakers in China didn’t accomplish their sales target, indicating the downward trend in Chinese car market for the second half of the year.