AS an ordinary office worker planning to buy a car, Wang Xiaoli decided to wait a few more months, expecting to benefit from the tariff cuts on imported cars. To her disappointment, experts say lower tariffs may not bring down car prices substantially.

　　Starting from January 1, tariffs on imported cars will be reduced to 30 per cent from the current 34.2-37.6 per cent as required by China's World Trade Organization commitments, made three years ago.

　　In addition, China will also remove quotas on vehicle and spare parts' imports at the beginning of next year.

　　"The short-term impact on the price of imported vehicles will be limited, since tariffs only account for 25 per cent of the retail price, and tariffs have already fallen a lot since 2001," said Yale Zhang, an analyst with CSM Worldwide, a US auto consulting firm.

　　China has being cutting auto import tariffs in a step-by-step manner since its entry into the WTO in 2001, when tariffs stood as high as 70-80 per cent.

　　As a result, the prices of imported cars have been falling over the past three years, especially steeply in 2004. The price of a Hyundai Coupe from South Korea has dropped to 198,000 yuan (US$23,942) from 350,000 yuan (US$42,322) at the beginning of the year.

　　Zhang added that prices of vehicles imported from Japan and Germany may rise because of the appreciation of their currencies.

　　Analysts say even further tariff cuts in 2006, which will finally reduce the tariff level to 25 per cent, won't hurt China's still fledgling auto industry, a major fear three years ago.

　　"Imported cars only account for about 4 per cent of annual auto sales in China, around 70,000 units annually," said Zhao Xuegui, an analyst with EverBright Securities Company.

　　Zhao added that the competition between domestic and imported vehicles would be limited since imported cars are mainly high-end sedans costing around 550,000 yuan (US$66,500) on average.

　　Foreign automobile manufacturers are introducing their most popular imported models to their joint ventures in China.

　　The Camry, which accounts for half of China's imported car market, will be manufactured in Toyota's joint venture in Guangzhou by 2006.

　　"The tariff cuts won't change the current market situation in terms of prices," said Xue Hao, spoken-person for the Shanghai Automotive Industry Corp.

　　"During the three-year transition period, domestic auto makers have experienced fierce competition, and the prices of domestic products are now close to the international market level," Xue added, referring to the Polo, priced at 110,000 yuan (US$13,285) in China and 11,366 Euros (US$15,113) in Germany.

　　After-market action

　　Although the reduction of tariffs on imported automobiles is not likely turn the China's huge market around, the opening up to the country's automobile service sector after December 10 should bring great changes.

　　The increase in the number of China's privately owned companies is helping to create an automobile maintenance and repair business, which grew by 50 per cent in 2004.

　　China's automobile maintenance market will be valued at an estimated 42 billion yuan (US$5.07 billion) by 2005 while the repair side will total US$4.83 billion, according to the China Automobile Industry Association.

　　"Foreign manufacturers will rush to enter the market after December 10," said Liu Fengxi, general manager of Shanghai-based Zhuide Trade Development Co Ltd, an organizer of the 2004 China Automobile After Market Forum held on December 4.

　　Foreign automotive service companies, such as the United State's AC Delco, Germany's Bosch, and Japan's Autobacs and YellowHat are entering China's automotive service and repair market.

　　"More companies in the field are expected to establish their chain stores in 2005," said Liu, "The trend will continue as China fully opens its automobile after-market in 2006."

　　The opening-up is a threat to domestic players and will cause fundamental changes in the market.

　　"The foreign companies and their chain-stores will storm the market and edge the domestic companies out," Liu added.

　　Although China boosts 300,000 auto repair companies and over 9,000 auto maintenance stores, most of them are small-sized workshops.

　　"A lack of efficient management and financial support put them at a disadvantage," Liu said.

　　The vicious competition also impedes the further development of the companies.

　　Increasing quantities of domestic investment has rushed into the field, especially during the last few years, as car sales have skyrocketed. Most repair companies provide similar services and price wars have broken out as each has sought a bigger market share.

　　"To reduce costs, many companies use poor-quality or fake products," Liu said. "The big foreign players can easily beat the domestic companies due to their efficient management and strong financial support."

　　Analysts also worry that foreign auto makers will establish their own auto service companies. They could try to gain market share by cutting the supply of auto parts and other relevant products to domestic players.

　　However, there are differing opinions on the danger of this.

　　"The domestic companies are not likely to be replaced by the foreign big players," said Yale Zhang. "They are small, so they can react quickly to the market. And lower charges will win them a large group of customers."

　　"China's auto service companies are focusing on basic services while foreign companies provide high-end services. They could even benefit from mutual development," Zhang said.

　　By Li Jian and Wang Xu