China: largest domestic SUV producer could lead a pricing war image

Chinese automakers, while usually utterly affordable, might be compiled to start discounting their sport utility vehicles as the biggest local manufacturer of such vehicles and market leader great Wall Motor has dropped the quotation on two of its best-selling models.

Barclays Plc and Sanford C. Bernstein & Co believe the rivals will be forced to follow suit, triggering a pricing war in the segment, as Great Wall, the largest sport utility vehicle manufacturer in China, lowered the prices of the H2 and H6 models this week by 5,000 yuan ($805) and 6,000 yuan, respectively, which had a major impact on the company stock. “We must say we are surprised that GWM is leading the price cuts among OEMs, since sales of its H6 and H2 have been solid and the overall discount level is low,” commented an analyst at Barclays afterwards. “We expect more local OEMs to follow GWM’s lead and the price decline to be widespread.” The discounts have appeared as Chinese automakers are expecting increased pressure from the pricing promoted recently by foreign brands – which had to lower prices of their models due to declining sales.

Chinese domestic automakers had been losing for years market share to the rapidly expanding global automakers, which enjoyed double digit growth for years – until the world’s largest auto market started to slow and fat profits are not the norm anymore. In response, local brands enjoyed a new lease of life by flooding the market with a myriad of affordable SUV models – catching off guard the larger competitors. But now foreign powers such as Volkswagen, Honda, GM and Ford have responded with appropriate price cuts.

Via Bloomberg