A quick tour of the China Auto Show 2002, which opens today in Beijing, reveals that competition in the domestic economy car market is heating up as foreign and domestic carmakers race to launch new models.

The country's largest auto expo, which runs through June 13, will see 1,200 automakers and auto-part suppliers showcase their latest products and technologies, including more than 550 cars.

While global auto giants, such as Mercedes-Benz, BMW and Lotus, provide the event with a little glamour by showcasing their luxury cars and concept vehicles, economy-size cars are the real stars of the show.

Shanghai General Motors Corp., the 50-50 joint venture between the world's largest automaker and Shanghai Auto-motive Group, debuted two upgraded versions of its Sail compact car at a ceremony before the show began.

GM was the first foreign automaker to manufacture compact cars in China in an effort to attract individuals who cannot afford full-size sedans.

"The brisk sales of Sail in the past year have helped Shanghai GM boost its market share in the domestic market, " said Chen Hong, general manager of Shanghai GM.

The company has sold more than 50,000 Sails so far, grabbing about 14.5 percent of China's small-car market. Last year, cars manufactured by Shanghai GM, including the Buick and Sail, accounted for 8 percent of the Chinese sedan market, compared with 5 percent in 2000.

The upgraded Sail, a convertible with improved interior decoration, is priced between 117,800 yuan (US$14,2000) and 133,800 yuan. While those prices are about 4,000 yuan more than the old Sail, Shanghai GM hopes the new features will make it more attractive to urbanities in their 20s and 30s.

"The move will enable us to strengthen Sail's competitiveness and strengthen its leading position in the domestic family car market," said Shanghai GM's Chen.

Analysts said GM is hoping to stand out against already intense competition from its global rivals, such as Volkswagen AG, and domestic automakers, which are starting to eat into GM's market share with their cheaper models.

Volkswagen launched its first made-in-China compact car, called Polo, in April, and Fiat SpA began to market its 1.5-liter Palio model early this year.

Both Ford Motor Co. and Toyota Motor Co. will use the auto show to debut their compact models, which will go into production at their joint ventures in China in the latter half of this year.

Domestic automakers are also revving up efforts to expand their presence in the market. The privately owned Zhejiang Geely Group and Anhui Chery Auto-motive Co. Ltd. reported dramatically increased sales of their entry-level cars this year.

The Chery compact sedan, which retails for between 87,980 yuan and 116,200 yuan, has been the fastest-growing car model in China in terms of sales.

Geely launched its self-developed compact car called Ulion, which is priced at only 76,900 yuan, in April, as it bids to beat Sail and other foreign models with its price advantage.

Early this year, price cuts triggered by Tianjin Automotive Group and Geely forced both GM and VW to slash prices to remain competitive.

Foreign carmakers usually claim that they are offering models with reasonable prices. However, the prices of most models are still higher than those in overseas markets, and beyond the reach of private customers. Manufacturers blame higher production costs for the lofty prices.

"The general technology at domestic ventures is still lower than at their foreign counterparts, which makes it difficult for carmakers to offer more-attractive prices," said Gu Qun, a senior associate with independent research agency Automotive Resources Asia Ltd.

"We won't join the price war," said Bernd Leissner, president of Volkswagen AG's Asia Pacific division.

Even though, Leissner admitted that VW's two ventures, Shanghai Volkswagen and First Automotive Works-Volkswagen, "have no time to waste in cutting manufacturing costs," as potential individual buyers are holding their purchases for better models and lower prices. Under such pressure, VW plans to invest 2.5 billion euros on the Chinese mainland over the next five years.

( eastday.com June 6, 2002)