Next year, car production and sales are expected to continue growing at a faster pace. However, the inevitable decline in prices is also on the horizon. As of 08:38 on December 26, 2003, Beijing entertainment newsletter reporter Zhang Jie reported that the auto industry is on track for sustained growth. According to the latest data from the China Automobile Industry Association, during the first 11 months of this year, the country produced 40.53 million vehicles, marking a 35.04% year-on-year increase. Sales reached 3.9375 million units, up 31.25% compared to the same period last year. These figures indicate that the growth rate for both production and sales in 2003 has surpassed the initial predictions of 20%-25% made by many experts at the start of the year. Zhang Xueying, deputy director of the forecasting department at the State Information Center, believes that the auto industry will maintain rapid growth next year. He suggests that exceeding 5 million vehicles in output is not a major challenge. From a long-term perspective, the auto industry has entered a stable and sustainable growth phase, similar to how consumer durables like home appliances have performed in the past. This trend is unlikely to change in 2004, as it is closely tied to China’s overall economic development. Currently, the domestic economy is experiencing new highs in growth and activity. Since the second half of this year, the economy has begun to recover, entering a new phase of expansion. Economic growth is expected to remain above 8% next year. Unlike previous government-led growth, the market now plays a more significant role, resulting in higher quality and efficiency of growth. This will likely lead to increased corporate profits and personal income, making pessimism about the future unwarranted. However, some analysts believe the growth rate may slow down to around 20% next year. Jia Xinguang, chief analyst at the Beijing Automotive Industry Research Institute, predicts that while overall growth will be around 20%, saloon cars could see a 50% increase, while passenger cars and trucks may grow by 10%. The total output is expected to surpass 5 million, with car production rising from 1.9 million this year to between 2.4 and 2.7 million. Experts also note that factors such as traffic congestion and limited parking spaces in cities like Beijing, Shanghai, and Guangzhou may slow growth, reducing the rate from 30% this year to about 20% next year. Additionally, rising oil prices, increasing steel costs, and electricity shortages are adding pressure to the industry. While upstream industries face price hikes, fierce competition is pushing car prices downward. This dual pressure will likely impact production negatively. Moreover, the complete removal of import licenses and quotas in 2005, along with continued tariff reductions, will intensify competition from imported cars, potentially leading to cash flow issues for domestic manufacturers. In 2003, car price cuts were widespread, affecting models from SAIC, Volkswagen, Fiat, Toyota, Chery, and others. For 2004, analysts predict even more pressure on prices due to consumer expectations of further tariff reductions in 2005. With nearly 50 new models expected to launch next year, competition will intensify, leading to further price declines. Imported cars will face a tough test in 2004, as dealers will rush to secure quotas early next year, leading to potential oversupply and falling prices in the second half of the year. This will reduce profit margins, especially for domestic manufacturers, which currently enjoy high profit rates of over 30%, compared to around 5% in developed countries. With increased investment and expansion by multinational automakers in China, competition is set to grow, posing challenges for domestic enterprises. As the industry evolves, maintaining profitability and competitiveness will become increasingly difficult.

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