Shanghai General Motors yesterday announced a 5,000-yuan (US$604) price cut for its 2.5-litre Buick G model.

The company has also added a sun roof to the model, which is now priced at 288,000 yuan (US$34,800), to make it more competitive.

At the beginning of March, Wuhan-based Dongfeng Citroen slashed the price of its 1.6-litre Fukang model by 8,000 yuan (US$966).

Although Dongfeng Citroen announced "the price adjustment" was its dealers' promotion, analysts, including Qie Xiaogang of the Beijing Asian Games Village Automobile Exchange, said the move might be the company's way of testing market reaction in preparation for further price adjustments this year.

Jiangsu-based Yueda Kia Co has also cut prices for its two Pride compact models by 5,200-7,200 yuan (US$630-870).

Jia Xinguang, chief analyst from the China National Automotive Industry Consultation and Development Corp, said the major reason local carmakers cut prices was not to deal with competitive pressures from an expected surge in vehicle imports, but to fight for greater market shares.

"Most of them have to employ price cuts to sell out their products in the store, as they will introduce new models this year," Jia said in an interview with Business Weekly.

There are few hardliners, one of which is Guangzhou Honda, who has reiterated it has no plans to cut prices for its Accord sedans this year.

Jia said imports of new vehicles would not have a great impact on domestic models because prices of imported cars were unlikely to further decline, although new vehicles are expected to flood into China beginning in June.

Prices of imported vehicles have fallen by around 10 per cent following a robust cut in China's auto tariffs.

In January, China slashed auto tariffs to 44-51 per cent from the previous 70-80 per cent, the largest cut since the nation's accession to the World Trade Organization (WTO).

As a result of the fierce price wars in January, overall sales for local carmakers have seen robust growth.

According to statistics from the China Association of Automobile Manufacturers, sales of domestic passenger cars amounted to 55,600 units in January, an increase of 30.9 per cent from the same period last year.

Production rose by 31 per cent year-on-year to 57,300 units in January.

"You may look closely for which model performs poorly on sales, and that model might be the one to take the lead to cut prices further," said Yale Zhang, an analyst for industry consultant Automotive Resources Asia Ltd.

Speculation is growing in the market that prices for the Bora sedan, produced by FAW Volkswagen, a joint venture between the First Automotive Works and Germany's Volkswagen AG, are likely to decline soon as its sales fell short of the company's expectations.

During the first two months of this year, sales of the Bora were around 4,200 units, far from FAW Volkswagen's target. The company plans to sell 50,000 Boras this year but so far has not said it will lower the Bora's price tag.

Currently, the price of the 1.8-litre Bora, launched at the end of last year, ranges from 193,000 yuan (US$23,300) to 240,000 yuan (US$29,000).

The company will begin to produce a 1.6-litre Bora in June. Its price will be no less than 170,000 yuan (US$20,500).