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Small car sales can rise with fuel price

(China Daily)
Updated: 2008-06-25 09:06

Cars waiting in line on a Shanghai road. Analysts believe the oil price hike will not have a fatal impact on China's soaring purchase enthusiasm on autos, although it is likely to ease the growth of the booming auto industry this year.[China Daily]

Wei Lai, a 28-year old office worker, is planning a baby next year, but she was also planning to buy a hatchback or MPV to replace her current SUV Isuzu.

But ever since the government raised gasoline prices last week, Wei, who had previously never attached any importance to pump prices since she started driving three years ago, is now starting to consider fuel efficiency as an important factor when choosing her next car.

"Before the price hike, I spent 600 yuan per month on gasoline, but now I have to pay 900 yuan," said Wei.

"Regarding the rising cost of gasoline, I will postpone buying a vehicle and watch how much further prices go up," said Ma Zhuo, an employee at Beijing Organizing Committee of the Games of the 29th Olympiad who originally planned to have his first car this year.

Last Friday, the government raised the price of gasoline by 0.8 yuan and diesel by 0.92 yuan a liter, while prices of natural gas and liquefied petroleum gas, however, remain unchanged.

Analysts believe that the hike will not have a fatal impact on China's soaring purchase enthusiasm, although it is likely to ease the growth of the booming auto industry this year.

"The growth rate of the passenger car market this year will be 15 percent, lower than the average 20 percent in recent years," said Xu Changming, an auto analyst with the State Information Center.

He said he believed most of the middle class, the major force in buying private cars, will still persist in their plan of owning a vehicle, but thought they will shift their attention from big sedans to economy cars.

"The rising gasoline price won't impact my plan to buy my first car for I really need it. However, it makes me think twice about buying an economy car with low fuel consumption," said Wang Li, a hardware engineer of a technology company in Beijing.

"After calculation, the increased cost of around 200 yuan per month is acceptable for us if the price don't go up too much further in the near future," said Wang's wife Lang Hua.

Jia Xinguang, an independent auto analyst based in Beijing, agreed that the oil price hike won't influence the total sales of passenger cars this year too much. However, he said he believed the sales structure will be changed, and customers will be more "inclined to buy smaller economy cars".

"It will be an opportunity for mini-cars mostly produced by local manufacturers, which experienced a sales decline in past years," said Jia.

Analysts and customers alike anticipated that a price hike would occur and in the long-term expect prices to continue to rise as China works toward its declared goal of limiting dependence on energy imports and developing the economy in a cleaner, more energy-efficient way during its 11th Five-Year Program (2006-10).

"It's unpleasant of course, but inevitable," said Michael Pielenz, a German who lived in Beijing for more than a decade.

"It's still much lower than the price of about 15 yuan per liter in Germany. Moreover, it can push people in China to reduce oil consumption and pay more attention to the environment," said the former professor with University of International Business and Economics, who drives a Volkswagen Golf.

It's also a good news for the automakers who invest a lot in the R&D of green cars, analysts said.