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German specialist: China's auto industry overproduces
FRANKFURT, Germany- The 60th International Automobile Ausstellung (IAA) opened last week in Frankfurt, with specialist in the motor vehicle industry from KPMG asserting that China is overproducing passenger cars which will evitable decrease the price of the vehicles.
According to Hensdite Kelos, chief manager of German manufacturer KPMG, the market of passenger cars in China looks very prosperous, but is showing signs of overproduction. “Already the prices of passenger cars dropped 7% because manufacturers push out sales to keep their market shares.”
KPMG has warned Chinese car manufacturers that the growing quantities of cars in China will eventually lead to price-drops and so reduce the dream of becoming a high profit foreign car manufacturer. Polar Blor, manager from IAA’s financial service department said that the estimated production volume of small cars in China in year 2003 is 2.7 million however; the sales will only reach 1.8 million leaving a loss of nearly million vehicles that will not be sold.
“Based on this trend, the production volume will reach 4.9 million cars a year by 2005, but the market can only absorb 2.6 million. In other words, the production of vehicles will double that of the actual sale of the vehicle.”
According to Blor, the overproduction has caused much pressure to the sales department and they have responded by clearing inventory by slashing the price of old models. The danger in this is that the price and profit margin will continually decrease.
Warnings of car overproduction in the market comes not only come from KPMG but also from The Chief of Verband der Automobilindustrie(German Association of Automotive Industry ) who said: “ Ten years ago, we were talking to Latin-American just like we are talking to China now. In the end, the manufacturers in Brazil, Argentina and Mexico all encountered serious losses.”
The bi-annual affair in Frankfurt is the biggest motor vehicle conference in the world. International Automobile Asstellung opened September 11th with more than 1,000 manufacturers from over 40 countries attending the conference. The conference ended September 21st with a record breaking million people attending the show.
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