When the New Year's Day was just over we saw China FAW Group Corporation announce a shocking news, i.e. the prices of its four types of "New Century Star" Red Flag Car were going to be drastically adjusted with an average reduction of 30,000 yuan for each, according to the news from Jinghua Times. This has signaled the first shot of a price war in China's medium-and-high-grade auto-market in the year 2002 and the reduction rate is quite eye-catching.

After the reduction, the price for the popular type of the "New Century Star" is 219,000 yuan while that of the lengthened deluxe type to be at 319,800 yuan. The products of the Red Flag "New Century Star" occupy a marketplace of medium-and-high-grade cars catering to the needs of office and private users. After the big-margin price reduction the enhancement of the price ratio as against the car performance as a whole has brought about a new vigor for the competition in the medium-and-high-grade car market in China.

The move was mainly due to the two considerations, explained China FAW Group as to why the drastic reduction of the price for the four types of their products. First of all, it is to make a balance of prices for homemade cars with that of the world market so as to meet the challenge from the imported brand cars after China's entry into the WTO. Particularly, the Red Flag "New Century Star" is a national brand, which the FAW has always been going in for the development on the principle of centering on itself while taking in advantages from other types of automobiles.

After entering the WTO the "New Century Star" series, as a C-grade car, still has the advantage in price as compared to the same type of imported cars from the world market. On the other hand we are considering the sharing-out of the benefit to our users. Because the "New Century Star" cars, except occupying certain places in the car market for office-use, have always been welcomed by some private users. The drastic reduction of 30,000 yuan for each car has offered a direct benefit to our users.

As the manufacturer holds, the plump reduction of 30,000 yuan in price for the red flag "New Century Star" series is to create a "most proportionate price as against performance as a whole". Therefore, we can make initiative to invigorate the market when facing with the challenge after China's entry into the WTO in order to enhance our sales volume. Besides, why it is possible for China FAW to make so drastic a reduction of price is due to the outstanding achievements we've obtained in our management and technological innovation in the year gone by. This has given the enterprise much room to maneuver for reducing the price by a big margin.

According to analysis of persons in the trade, since China FAW brought into the market the two types of red flag cars, i.e. the "Celebrity" and the "Type 18" and made a variant reduction of 40,000 yuan for the "Propitious Star" it has always received a very good response. This has put the FAW in a very good position with a sales volume to break through 17,000 cars annually, outstripping the sales quota of the year 2001. Facing with the severer competition in 2002, for the FAW ever buttered in price reduction to herald the cutting of price with its brand products, the "New Century Star" is a necessary choice for catering to the market competition.

( January 8, 2002)