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China's Changan cuts car prices again

SHANGHAI, July 1 (Reuters) - Chinese auto producer Chongqing Changan Automobile Co Ltd said on Monday it has cut the prices of compact cars made with Japan's Suzuki Motor Corp for the third time this year.

The joint venture said in a statement in the China Securities Journal it lowered the price of its Lingyang small car on Monday by an average 12 percent, or between 10,000 to 15,000 yuan ($1,208 to $1,812), Changan said .

A Changan official said the prices of five high-end Lingyang models had dropped to between 79,800 yuan and 106,800 yuan.

"The cuts aim to meet the challenges of fierce competition in the automobile market and enhance the competitiveness of our products," the Changan statement said.

"The company's budget for this year has taken the price cuts into consideration and they will not affect our profits," it said without giving further details.

The Shenzhen-listed automaker had already slashed prices of its Lingyang and low-end Alto cars in January and March. The cars are all made by a venture 35-percent-owned by Suzuki.

The latest cuts show a brutal price war in the domestic auto market, spurred by China's entry into the World Trade Organisation last year, was not abating even though it had cut into many firms' profit margins and earnings, analysts said.

The government lowered auto import tariffs to 40-50 percent to this year as part of its commitments for joining the WTO in December. Tariffs will drop to 25 percent in 2006.

Other domestic carmakers like First Automotive Works (FAW) and Tianjin Automotive Industry Corp have also cut prices as competition from cheaper imports intensifies.

Vehicle sales are forecast to rise to three million this year from 2.36 million last year, state newspapers said. Analysts put foreign imports at 200,000 cars, up from 72,000 in 2001.

Changan, based in the southwestern province of Sichuan, is also building a 50-50 plant with Ford that will roll out economy cars this year.

The firm's B shares, available to foreign investors, edged down 0.6 percent to $3.30 in line with the overall market. ($1=8.277 Yuan)