Global car manufacturers are expected to attend the Shanghai auto show on Wednesday, April 19, amid a decline in sales and a looming price war driven by tough competition in China's car market, an article by arabnews.com said.
Local car sales soared with the rapid growth of China's middle class, but future prospects may soon dim as top global carmakers such as Toyota, Volkswagen, and GM are expected to introduce their latest models in the car show.
According to the China Association of Automobile Manufacturers (CAAM), sales of passenger vehicles have almost quintupled over the past decade, and last year, car sales surged 14.9 percent to a record 24.38 million.
But consultancy IHS Markit said last week that sales growth in China auto market this year will be minimal and could even reduce in 2018. In 2016, a government purchase incentive has sent sales volume upward.
HIS Markit, however, said that the major price war would be advantageous to consumers as car manufacturers and dealers would slash prices to sell their stock.
"The threat now for international automakers is that if local players begin cutting prices . . . there will be a rampant price war across the market as automakers compete to attract new car buyers," it said.
Despite this, China is still considered as a goldmine for car manufacturers.
Car sales set a 26th straight high-water mark last year, which surpassed the U.S. record of 17.55 million cars sold. China beat the record eight years ago to become the world's top car market.
Car sales surged due to the government's move to cut into half the 10 percent purchase tax on small-engine cars in 2015. This year, the tax has been raised to 7.5 percent and will revert to 10 percent in 2018, which could affect the sales.
Analysts said that car sales in China will depend on the maturing taste of consumers and on how manufacturers will adapt to their tastes.
Although China's car industry is now crowded with domestic carmakers, many of them will not survive due to competition, according to Johan Karlberg, a Shanghai-based partner with global consultancy Roland Berger.
At the Shanghai car show, major car manufacturers are expected to introduce a number of new models for Chinese consumers.
The report said that many carmakers now capitalize on the growing demand for sports utility vehicles (SUVs) and "new energy" cars.
Volkswagen and giants GM, Ford and other electric-car upstarts are all expected to increase their offerings in the Chinese market this year.
Analysts said that middle-class consumers will drive future car sales up, especially in populated and fast-growing lower-tier cities, in addition to the growth in car-hailing and vehicle-sharing services.