Chinese automakers slash prices, offer subsidies in bid to kickstart consumption

Chinese automakers have made a drastic move to buoy flagging consumer spending, slashing prices and offering generous subsidies in a bid to stimulate demand.

In a bid to kick-start consumption, Chinese auto-manufacturers have resorted to hefty discounts and subsidies. Reports indicate the price of a number of models has been cut by up to 10 percent, with subsidies being offered as high as 20,000 Yuan (U.S. $2,900).

The move comes as the Chinese economy continues to slow. Figures published by the National Bureau of Statistics show that vehicle sales fell by 7.5 percent in the first five months of 2019 compared to the same period last year, with sales volume reaching 10.5 million units over the period.

The initiative has thus far been well received by consumers, with reports suggesting that car sales have increased by up to 50 percent in certain areas.

However, some analysts have criticized the move, arguing that it will have little lasting impact on consumer spending. They argue that the discounts are unlikely to encourage consumers to purchase cars, instead only serving to shift demand away from more expensive models.

The decision also raises questions about the long-term sustainability of the initiative. With manufacturers already under pressure to reduce costs, any further reduction in prices could hurt their profits.

In addition, the move could lead to a rise in car ownership, placing further strain on China’s already congested roads and highways.

The Chinese government has thus far been slow to respond to the initiative, with no comment released on whether it plans to extend the scheme or introduce similar measures in the future.

However, it is clear that the decision to slash prices and offer generous subsidies was an attempt to stave off further economic stagnation and mitigate the impact of the slowing economy on consumer spending.