Race for sales

To cool the fast-growing auto market, the Ministry of Finance last year announced that, from Jan 1, the central government would end its two-year tax incentives for small cars and subsidies to farmers.

"The policies have made us lower our expectations for this year's auto market from 10 to 15 percent year-on-year growth to no more than 8 percent," said Cui Dongshu, deputy secretary-general of the National Passenger Car Information Exchange Association. "The serious excessive consumption in 2010 may even lead to zero or negative growth this year."

The association's secretary-general, Rao Da, also said he believes China is facing negative growth for the first time in two decades, although "short-term negative growth is good for the industry restructure and mergers, which the government is calling for".

"The fierce competition will help improve the quality and technology, as well as the management and operation of the automakers," said Rao. "It should be a good opportunity for China to strengthen its industry."

Looking long term, analysts agree the country is still the automobile market with the most potential.

Official statistics show that average ownership nationwide is 52 units for every 1,000 people, no more than half of the world average of 128 units. With this in mind, experts expect the market to grow 10 to 15 percent annually in the next five to 10 years.

For Beijing dealerships, however, the news offers little comfort ahead of the coming Lunar New Year holidays.

"We all expected to get an extra bonus for the high profits our 4S store made last year," said a salesman called Ma at a showroom selling Volkswagen models. "Forget about the bonus, now we're hoping we can hold down our jobs."

(China Daily January 14 2011)