HONG KONG -- Brilliance China Automotive Holdings Limited will slash prices of its Toyota-design luxury vans by up to 45 percent when its begins to use locally produced parts later this year, a source familiar with the company said on Wednesday.
The money saved from making its own parts instead of using costly imports will more than make up for the price cuts, the source said.
Margins are expected to increase to over 20 percent from the current 15 percent as its joint venture company Brilliance Jinbei Car Co Ltd begins to use local components.
Competition in the Chinese automobile market has intensified since the country's entry into the World Trade Organisation in late 2001, with import tariffs declining gradually. Brilliance has already been forced to trim vehicle prices to fend off cheaper imports.
"The sale price will be lowered to about 200,000-250,000 yuan when domestic content rises to 60 percent in September," the source told Reuters.
The 2.7-litre "Grace" multi-purpose vans, launched last November for 363,800 yuan (US$43,940) each, are produced by Brilliance Jinbei based on designs from Japan's largest car maker Toyota Motor Corp.
All parts and components for the van are currently imported from Toyota.
News of the likely price cuts sent Brilliance China's shares down 1.6 percent to HK$1.84 in Hong Kong. As of Tuesday's close the stock had surged nearly 70 percent in the last three months as investors sought out companies with exposure to China's booming economy and growing consumer affluence.
Brilliance Jinbei, which is 51 percent owned by Brilliance China and 49 percent owned by Shenyang Jinbei Automotive, is China's largest van maker. It sold 65,000 minibuses in 2002.
The company sold 5,600 mini-vans in January, up 115 percent from the same month last year, the source said.
Annual production capacity will double to 140,000 after the completion of a plan announced in January to boost the joint venture's capital by US$273 million, Brilliance Chairman Wu Xiaoan said on Wednesday.
"Higher production and better margins on the 'Grace' series should help offset the impact of lower sale prices among mini-vans," he told reporters after a shareholders' meeting. Wu also said the company last year sold 8,826 Zhonghua sedans, which were launched in August. From January to the first half of February, it sold 5,200 Zhonghua cars.
Brilliance hoped to sell 25,000 to 30,000 Zhonghua cars in 2003. The company had no plan to cut the sales price of the cars, currently at 169,800 yuan, he said.