GM discounts prices in China to counter sales decline

Bloomberg News

General Motors Co. cut its prices in China after reporting a decline in deliveries there last month, joining Volkswagen AG in stepping up discounts as growth slows in their largest market.

GM’s joint venture with SAIC Motor Corp. announced price cuts of as much as 53,900 yuan ($8,700) on 40 models across its Buick, Chevrolet and Cadillac brands, according to a statement on its website.

Chevrolet deliveries dropped 5.6 percent last month, while Buick sales slumped 8.5 percent, according to the company.

Foreign automakers have come under increasing pressure in China as economic growth slows in the world’s largest auto market and local brands gain market share by offering cheaper sport utility vehicles.

Passenger-vehicle sales rose at the slowest pace in five months in April, with most of the expansion coming from local brands.

“In years to come we expect 2015 to be known as the start of China’s Great Moderation,’ as pricing and margins fall from levels far above global norms,” Robin Zhu, senior analyst at Sanford C. Bernstein Ltd., wrote in a report today.

“The ramifications of a drop in Chinese market profitability may be substantial.”

Besides discounts, foreign automakers are offering incentives such as subsidized insurance, zero down payment, interest-free financing, exemption of purchase tax and trade-in subsidies, according to Bernstein.