Price reduction in China triggers cost reduction among global automobile tycoons

To promote vehicle sales in the depressed Chinese auto market, an array of automakers launch constantly official selling price reduction or discounts up to thousands of yuan, which, some believe, reveals the huge profits in the vehicle industry.

In fact, any production of any industry possesses a cost minimum line, especially in the capital-intensive auto industry. The price reduction urges automakers to reduce cost so as to support selling price reduction.

In order to cover the losses of selling price reduction, many multinational automobile manufactures launch a new round of cost reduction strategies. As the overall selling price reduction in China, the biggest auto market in the globe, the cost reduction become increasingly urgent for auto tycoons.

FAW Toyota is said to build new production line in Tianjin, a northern city in China, which will adopt the Toyota New Global Architecture to produce vehicles. The new architecture will save up to 20 percent of the original cost.

Mercedes has helped its parent company Daimler to achieve 10 percent profit margin in the first half of the year through an array of cost reduction policies. Additionally, Mercedes has surpassed Audi and BMW to be the top sales of luxury vehicle automakers in the same period in the global market.

Volkswagen, who achieves not so good in the first half of the year in China, indicates that the company will pay more attention in cost reduction, especially for the Chinese market.

In addition to Toyota, other Japanese automakers, encompassing Nissan and Honda, also announce cutting cost plans in the year. They intend to realize cost reduction through modularizing production platform, sharing spare parts, updating plants and improving architectures.

It will last for a long period in China that automakers struggle to cut selling price and cost in the same time. After the price fight on a basis of brad image, here comes the new price reduction competition in the SUV market segment.