Volkswagen, the biggest passenger car manufacturer in China, beat a slew of strong rivals such as DaimlerChrysler, Hyundai Motor and BMW to win exclusive rights as the official automobile partner of the Beijing 2008 Olympic Games.

The partnership will be under the name of Volkswagen Beijing Organizing Committee of the 2008 Olympic Games Group China, the German firm's newly created entity for the Chinese car market.

Wang Wei, vice chairman of the Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG), said that the selection was the first in BOCOG's marketing plan. Partners in other industries, such as banking, petrochemicals and telecommunications, will be announced in the near future.

The marketing plan went into action last September.

"We hope the Beijing 2008 Olympic Games will be our chance to give something back to society and the people of China, whose enthusiastic support we have enjoyed for many years," said Folker Weissgerber, a Volkswagen board member.

The selection of the carmaker was announced with the Beijing International Motor Show in the background. The show opened to the public Thursday.

More than 1,400 foreign and domestic vehicle and component companies are flaunting their products during the seven-day motor show.

Organizers of the show issued only 400,000 tickets to control crowds.

But car sales in China are cooling down. Sales of all China-made vehicles declined 8.2 percent and passenger cars by 2.7 percent in April.

"The slowdown in car sales is mainly a result of customers' hesitation to buy because of frequent price cuts and government policies, such as controls on bank car loans," said Zhang Xin, auto analyst with Guotai & Jun'an Securities Co.

"I'm looking forward to further price cuts and new models.... I have decided not to buy a car this year," said motor show visitor Liu Zhitian.

Prices in the domestic market will continue to decline as battles between manufacturers escalate. Moreover, China will cancel import quotas next year and slash tariffs to 25 percent in 2006 in accordance with its commitments to the World Trade Organization.

"There is still much room for price cuts as profit margins of car producers in China remain much higher than in the developed markets," Zhang said.

Experts also warn that overcapacity, limited oil supply, and transportation and environment conditions may brake the auto industry's future development.

However, foreign automakers, especially Volkswagen, are still upbeat about the China market.

Weissgerber predicted that China's passenger car market will grow to 4.6 million units annually by 2008 and 8.5 million units by 2014, up from 2.2 million units last year.

Volkswagen plans will invest some 60 billion yuan (US7.2 billion) in China by 2008, the biggest input during the period announced by a foreign automaker.

He said the carmaker and its joint venture partner First Automotive Works Corp (FAW) plan to invest 290 million euros (US$3.5 billion) to build a new engine joint venture in Dalian, Liaoning Province.

Volkswagen sold 697,000 cars last year in China and claimed a 30.8 percent share of the market. It now runs two car JVs in China with FAW and Shanghai Automotive Industry Corp.

Almost all of the other world's auto giants, such as General Motors, Ford, Toyota, DaimlerChrysler and BMW, have built one or more JVs here.

(China Daily June 11, 2004)