The Document Says China Will Lose Its Competitive Edge In Car Exports Because Of Rising Production Costs

Business.

Chinese car industry in growing period - the demand for automobiles from china will remain robust in 2007 and beyond, a chaotic export, but overcapacity system and falling profitability will continue to plague the industry, the state information center said in a document on domestic and global economic development in 200the document says overcapacity remains the biggest headache for the china car industry. That year most firms became caught up in price wars as inventory kept rising.

In 2006, the National Development and Reform Commission, China top economic planner, began to list car - making as an overcapacity sector. - the document says that if the government encourages more firms to enter the sector by not raising industry thresholds, unemployment and unpaid, bankruptcies bank loans will inevitably result. Another 204 firms each exported just one auto. In 2005, 025 auto exporters, China had 1, of which only two had exports valued above US$ 100 million and only eight had exports above$ 30 million. The document says China auto export industry produces mostly duplicated products targeting low end to mid range markets. And the price - slashing tactic generally adopted by Chinese car exporters will damage the international image of made in China cars, as some companies cannot provide after - sale service when products are sold at such low prices.

The document says China will lose its competitive edge in car exports because of rising production costs. - though china car makers reaped big profits in 2006, the trend is not sustainable on the long term, said the state information center document, citing a worsening supply - demand imbalance that will be exacerbated by the rising cost of materials. However, despite all the negative factors, the document said the demand for cars from China in 2007 will rise by 18% over 2006 to 8 million units, while car output will reach 9 million units, 20% higher than in 200 This article was researched and produced by Posicionarte for China Trading Company, 2007