Chinese cars on the WTO Road Part 3 – Price

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This is part three in a multi part series on the effects of China’s ten year entry into the World Trade Organization, Part 1 Regulations , Part 2 Sales.

At the end of 2002, Honda Accord 6^th generation was still a bestselling model in the Chinese market, 3 years after it rolled off the production line in Guangzhou Province. However, to pay about 300,000 RMB (€35.1k) for a 2.3L model was not a wise choice at that time, because the 7^thgeneration hit the market in the beginning of 2003, whose price started from 260,000 RMB(€30.4k, 2.4L model) – 13% lower than its predecessor. This is a miniature of the decreasing car price in the past decade.

Since China joined the World Trade Organization 10 year ago, most car prices have decreased rapidly. But the decreasing rate for each segment is various. A few segments have even increased. China Car Times chose 10 different car models to analyze the real variation of car price during the 10 years.

To maintain a certain market position, a model in 2011 should be a successor of the 2001 model. Although in China, many car models just have little updates during 10 years, their positions have always lowered, so they cannot be our choices.

The compact cars were priced very high 10 years ago. Volkswagen Bora A4 1.8L started from 193,300 RMB (€22.6k). While Sagitar (Jetta A5), with much larger dimension and more advanced 1.4TSI engine, is just price at 148,800 RMB (€17.4k) now– 23% less than its predecessor.

The mid-sized cars share similar decreasing rates. Prices of Volkswagen 1.8T, Buick Regal 2.5L, Honda Accord 2.0L started between 248,000 to 288,000 RMB (€29.0k-33.7k). But now, the prices of their successors start between 202,800 to 215,800 RMB (€23.7k-25.3k). The decreasing rates are 13%, 27%, 22% respectively. The reason why Regal’s price decreased sharply is the 2001 Regal has 2 successors – the new Regal (Opel Insignia) is the smaller and cheaper one, while LaCrosse is the larger one.

The price of new Peugeot 508 and Camry 2.4L (6^th generation) equal to half of the 2001 models, because old 406 and old Camry were imported cars, whose import tariff rate were up to 70%.

Unluckily, the buyers of executive cars cannot save much money during the 10 years. Audi A6 LWB 2.0T (C6) shares a similar price with its predecessor, A6 LWB 1.8T model in 2001. Since BMW 5 series and Mercedes E-Class were not domestically produced in 2001, it is no wonder that their prices have decreased sharply during the decade.

Compared with the buyers of luxury cars, the executive car buyers will be happy. The price of imported Mercedes-Benz S600 has increased by more than 60%. Now, it costs 2,600,000 RMB (€306.8k). Meanwhile, the price of BMW 760Li, Ferrari 360/458 also increased. This involves two reasons: first, the consumption tax rate for 4.0L or larger cars increased from 20% to 40% in 2008; second, the rich in China do not care much about the price, so that high price is a good marketing measure for luxury cars in China.

As for the local brands, the price has also decreased. 10 years ago, a SEAT Toledo based CheryFuwin (means wind and cloud) cost 89,580 RMB (€10.6k). But now, Fuwin II just costs 52,800 RMB (€6.2k)– 41% less than its predecessor. In fact, Chinese local brands want to build expensive cars, but consumers do not like them. For most consumers, if they can afford a car from joint ventures, they will never consider one from local brands.

In the coming decade, will most car price decrease continuously? No. Because China is becoming a mature and open market, like American and Europe, car price will be more stable in the future.