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  Dong Yang, head of the China Association of Automobile Manufacturers
Association warns price war in China will spread to local brands
Reuters | 2015/6/19

BEIJING -- A price war among global auto brands offering showroom discounts in China will quickly spread to domestic marques as overall sales slow, the head of the China Association of Automobile Manufacturers warned.

Global automakers such as General Motors, Volkswagen and Ford have cut prices on Chinese models in recent months to combat weak sales growth as China's economy slows to its slackest pace in 25 years.

Dong Yang, secretary general of the manufacturers association, wrote in his blog that the competition would spread. "The price war among joint venture firms will quickly spread to Chinese brands," he wrote. "In the next few months most Chinese automakers will encounter more difficulty."

Those brands facing hardship should consider transforming or uniting with others, he wrote, rather than continuing to expand.

The government and analysts have long called for consolidation in the highly fragmented sector to improve efficiency and competition.

"Local production surpluses do exist, principally among a portion of Chinese brand passenger car makers because of inadequate brand competitiveness," Dong wrote.

Vehicle sales in China rose only 2.1 percent year on year in the first five months of the year, giving 2015 the slowest start since 2012 and suggesting that full-year growth could be well below last year's pace of 6.9 percent.

Volkswagen AG and its joint-venture partner, SAIC Motor Corp, announced fresh discounts of up to 20,000 yuan ($3,200) last month on Passat, Lavida and Santana models, expanding from its initial discounting push in April.

Dong wrote that the world's largest auto market had not peaked as China has roughly 150 million car owners and shouldn't shift to slower growth until there are 400 million owners.

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