Vehicle prices in H2 set to reverse

THE decline in vehicle prices is expected to continue in the second half of this year but at a slower pace, China's top economic planner has said in a report.

Higher fuel prices, overcapacity and tightened credit may continue to curb buying and lower the prices, according to the vehicle-price monitoring department at the National Development and Reform Commission.

But the surging cost of raw materials and the expectation of a higher purchase tax will prevent car makers cutting vehicle prices too much, it added.

The report said a survey in 36 big cities found vehicle prices dipped an average 3 percent in the first half of the year from the same period last year.

Average prices last month were about 0.31 percent lower than in January.

"Price reductions will still be the driving force to boost sales in the second half when supply exceeds demand," the report said.

"But higher production costs will put most makers under pressure to defend profitability," it added.

Auto makers have been expanding production to meet higher sales targets set in the beginning of this year, leading to possible overcapacity if demand drops.

Cheng Xiaodong, head of the vehicle-price monitoring department, said China's stockpile of new vehicles rose to 170,000 at the end of June. Bloomberg News said that was the highest level in four years.

The China Association of Automobile Manufacturers said makers including Toyota Motor Corp increased output at a combined 23 percent last year and 17 percent for the first half of this year.

Half-year sales rose 19 percent to 5.18 million units from a year earlier. But the growth is slower than the 23 percent a year earlier, influenced by inflation and a lackluster stock market.