China Business

Apr 7, 2006

Shanghai GM not to raise car prices

BEIJING - Shanghai General Motors, a 50-50 joint venture between General Motors (GM) and Shanghai Automotive Industry Corporation, has announced that it will not readjust car prices for the time being following the implementation of a new consumption tax policy on April 1.

Many automakers in the country are expected to raise their prices, but Shanghai GM, in contrast, said it would cut production costs to offset the effects of the new consumption tax policy.

Shanghai GM now produces the country's most complete range of car models, with engine displacement ranging from 1.4 liters to 4.6 liters.

A Shanghai GM official said that the readjustment of tax rates imposed on vehicles will affect Shanghai GM to certain extent, but the company will not raise car prices at present, even that of the Cadillac brand, which features an engine displacement of 2.8L.

Initial estimates show that if Shanghai GM bears the new burden incurred by the readjusted consumption taxes, its production costs will increase by at least 150 million yuan (US$18.7 million). According to sources with Shanghai GM, even if the company cannot digest the newly-added costs, it is likely to accept reduced profits in 2006 in order to safeguard its brand image.

However, some analysts say that Shanghai GM still might increase prices, for example, by offering new models and upgrading the features of models sold.

(Asia Pulse/XIC)

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