China car cos to curb competition

"In addition, prices of cars of the same brand and model should basically be the same in different markets," it said.

Companies breaching the pricing deal would be penalised with a variety of measures including fines, the newspaper quoted a China Automobile Industry Association (CAIA) official as saying. Officials of the State Machine-building Industry Bureau and the CAIA also attended the meeting, it said.

China’s biggest car makers include First Auto Works, which has a joint venture with Germany’s Volkswagen producing VW’s Jetta model, and Shanghai Automotive IndustryCorp, which makes Volkswagen Santanas.

Shanghai Automotive is also partners in a $1.5-billion deal with General Motors of the United States to make Buick sedans.

Separately, the Market Daily said central authorities planned to bolster China’s auto sector with a stimulus package including tax cuts and easier access to bank credit and foreign capital. Car makers would also have priority in seeking stock and debt issues and would win increased financial independence, the newspaper said.

It gave no timetable for implementing the plan but said domestic car makers with an annual capacity of at least 150,000 automobiles would be entitled to the privileges.

Chinese car makers have suffered from cut-throat competition amid flagging demand, overcapacity and a flood of smuggled automobiles and parts.

Sales of many car makers slumped further since China slashed its average tariff on car imports to 80 per cent from 100 percent last October, the CAIA official was quoted as saying. The cut had fuelled a price waramong domestic car producers and exacerbated the woes of smaller operations, he said.

Despite the lower tariffs many domestic producers and Sino-foreign joint ventures continued to use smuggled parts to reduce their production costs, he said.