Shanghai GM Resists Price Hike Amid Consumption Tax Policy Shift

Shanghai General Motors, a joint venture between General Motors and Shanghai Automotive Industry Corp, has announced that it will not raise car prices following the implementation of new consumption tax policy as of April 1. The company will instead aim to control production costs to mitigate the effects of the tax policy change. As one of the country's most complete car manufacturers, Shanghai GM produces models with displacements ranging from 1.4L to 4.6L. The company has taken a stance to maintain prices, even for the Cadillac brand, despite initial estimates suggesting a production cost increase of at least 150 million yuan (US$18.7 million) due to the readjusted consumption taxes.

Key Takeaways:

Shanghai GM will not adjust car prices for the time being, despite the new consumption tax policy.
The company aims to control production costs to offset the effects of the tax policy.
Shanghai GM produces the country's most complete car models with displacements ranging from 1.4L to 4.6L.
The readjustment of tax rates imposed on vehicles will affect Shanghai GM to some extent.
Shanghai GM will likely see reduced profits in 2006 to safeguard its brand image if it cannot digest the newly-added cost.
Analysts suggest there may be a possibility for Shanghai GM to lift prices through offering new models and auto upgrades.

Statistics:

150 million yuan (US$18.7 million): estimated increase in production cost for Shanghai GM due to readjusted consumption taxes.
50%: joint venture ownership between General Motors and Shanghai Automotive Industry Corp.
2.8L: displacement of Cadillac brand models, which will not see a price hike.
2006: likely year for Shanghai GM to see reduced profits to safeguard its brand image.
US$18.7 million equivalent: initial estimated increase in production cost for Shanghai GM due to readjusted consumption taxes.

Sources:

"Shanghai GM to Bear New Burden on Consumption Tax" by XIC, April 5, 2006.