BEIJING - After several flat years, new-car sales in China finally rose smartly in 1997.
Car sales rose 25 percent last year to about 475,000 units, according to Automotive Resources Asia, a Bangkok-based consulting and market-research firm that tracks the China market.
Imports, meanwhile, slumped 35 percent to about 25,000 cars, it said.
The Automotive Resources Asia numbers are best estimates, since official data have not been compiled yet.
'Private buyers played a big part in the market last year,' said Coco Kee, director of Automotive Resources Asia's Beijing office. 'We expect passenger-car sales will rise again this year, but by less than 30 percent.'
Despite the gain, many Western auto executives say there is no sign yet of the huge sales surge needed to produce dividends on the massive investment they have poured into the country in recent years.
Indeed, inventories of unsold cars at the end of January totaled 125,600 units, according to Xinhua, China's official news agency.
'The sales situation for passenger cars in 1997 was not as good as we expected,' admitted a spokesperson for Volkswagen AG, which holds over half of the market in China through its two big joint ventures.
Manufacturers are now fighting desperately to maintain market share.
The result: a price war.
Shanghai Automobile Industry Corp., which markets the output of Shanghai Volkswagen, has cut the price of its Santana models by 9 to 14 percent, to the equivalent of about $13,800. First Auto Works is offering similar discounts on its Jetta model.
The price cuts are not expected to boost overall sales by much because of the country's tight credit policies, industry executives here say.
'Sales this year will not be up dramatically over last year,' said Vaughn Koshkarian, chairman of Ford Motor China, which assembles the Transit van here in a joint venture.
'We are not going to see a huge spike in the industry until something is done on the key issues of taxation and financing and continued investments in infrastructure.'
But there are encouraging signs.
Car rentals are increasing in several major cities, providing an outlet of sorts for the many urban Chinese who possess driver's licenses but no cars.
In Tianjin, a leading industrial center on the east coast, at least four rental companies are in operation.
Rental companies, which are often state-owned, find it far easier to get financing than individual citizens. Thus, they are a significant new market for automakers here.
And the new Premier, Zhu Rongji, has proposed a $1 trillion investment program in housing and roads, which should provide flow-through impetus for the auto industry.
Says Ford's Koshkarian: 'Housing and auto sales go hand in hand.'