Status symbol

"The market is still driven by first-time car buyers, and for them, the purchase of a car is a means of demonstrating economic success. People won't just refrain from a purchase because of the current increase of gasoline prices. Even at this level, the price is still low compared to many other markets," he added.

Zhang Xin, an analyst from Guotai Jun'an Securities Co Ltd, agreed. "We do not see a major impact because the slight 3 to 5 yuan additional daily cost is acceptable to most consumers. The rising fuel prices could be partly offset by declining car prices.

"Since there is still room for further price increases, the accumulated price hike will scare people away or make them delay their purchase," he warned.

TNS's Klaus concurred. "If there are repetitive and substantial increases of gasoline prices, it can impact new car sales at a certain point. This may benefit the used car market, as people may consider buying a cheaper used car then," he added.

Car makers are keeping a cool head about the latest fuel increase, partly because they had already prepared for it as the price of oil has risen.

"We have been looking at the possible price increase since last year," said a public relations officer with Chang'an Ford Mazda.

"We have adjusted our product line-up and are on track to launch a competitive small-engine powered vehicle late this year."

Gong Guangjun, communication manager at Shanghai GM, also shrugged off the possibility of a sales slump.

"If the price keeps going up, auto buyers will pay more attention to more fuel-efficient models and we need to keep up with the demand," he said.

Shanghai GM earlier said that sales of its small-engined Chevrolet models will account for 60 percent of its total.

The Chinese venture of General Motors Corp launched a green-energy program in January this year, pledging to introduce better fuel economy and low-emission engine technologies. And Toyota Motor Corp has launched two compact car models this year.

(Shanghai Daily June 25, 2008)