SHANGHAI (Reuters) - Car output in China soared 70.6 percent year over year in July to 170,900 units, the second-highest month of 2003, but the country's statistics agency warned on Tuesday of a second-half price battle that could pinch margins.
Output over the first seven months in the world's fastest growing major car market leapt 94.8 percent year over year to 1.07 million cars -- surpassing the 1.06 million in all of 2002, the State Statistical Bureau said on its Web site at www.stats.gov.cn.
With local and foreign car makers in a race to ramp up output, putting the country on track to crank out more than two million cars this year, analysts warned of an impending glut.
"It's quite possible we'd see a new round of price wars in the second half, because a spate of new models has already been put into mass production," the bureau said in a statement.
Despite the roaring output, July lagged June's record 179,200 units, led by First Automotive Works (FAW), the bureau said.
Still, China will soon unveil policies to cool down perceived over-investment in the sector, perhaps by implementing stricter requirements on the building of plants and measures to restructure smaller players, state media and analysts say.
No official guidelines have been published, but speculation is rife that the new policies might favor local car makers at the expense of foreign ones such as Volkswagen AG.
The country already is home to more than 120 automakers, but only two -- FAW and Shanghai Automotive Industry Corp. -- put out more than 500,000 vehicles a year. Eight local automakers maintain annual output of more than 100,000, but 95 others failed to make even 10,000 in 2002.
SARS EFFECT DISSIPATES
Foreign automakers and their Chinese partners have announced capacity increases that could lift annual production to about 2.28 million vehicles by 2007 from 1.26 million in 2003.
Beyond cars, production of all types of vehicles is recovering after a short-lived slowdown in April and May, the peak of the SARS outbreak, the bureau said.
FAW, which has manufacturing joint ventures with Volkswagen and Toyota Motor Corp., more than doubled its July output to 33,800 cars -- a monthly record.
China's largest automaker now aims to raise annual production capacity to two million cars by 2007, from 900,000 now.