THE outlook of China's automotive industry is likely to remain robust throughout 2008.

In addition to brisk sales, various new models flocking to the market, and mergers and acquisitions among domestic players, there are also some new trends and concerns that may affect the overall picture.

In this report, Shanghai Daily will offer readers a drive into what the market will hold for Chinese drivers in the year ahead.

Slower sales

Most analysts agreed that China's auto industry would develop at a slower pace this year due to a much larger base figure for comparison as well as increasing fuel prices.

Dong Yang, an official from China Association of Automobile Manufacturers, said the nation's vehicle sales are likely to rise 15 percent to hit a record 10 million units this year, compared to a 22-percent jump for 2006.

The slower sales have re-triggered concerns of overcapacity among the public amid car makers' growing enthusiasm in expanding capacity since last year.

For example, Shenzhen-based BYD Auto has just inaugurated its 100,000-unit plant in Shenzhen, doubling its capacity from a year earlier. When the two plants run on full capacity, the car maker will produce 400,000 units a year compared with less than 150,000 this year.

1.6-liter capacity

Despite record high oil prices and the nation's efforts to promote fuel efficient vehicles, there will be more cars with 1.6-liter engines in the market.

"The 1.6-liter will be the golden engine capacity due to the change in consumption structure," said Lang Xuehong, chief auto analyst at Sinotrust Auto Consulting Co Ltd.

In addition, most car makers have placed high emphasis on economy cars with engines larger than 1.4-liter to make higher profits, Lang added.

Last year, cars powered by engine capacity of less than 1.3-liter totaled 1.64 million units, accounting for 26 percent of the total passenger car sales. The market share dropped six percent from a year earlier while that of engine sizes less than one-liter plunged 17 percent.

SUV boom

Sport utility vehicles, whose sales have flagged in China, are on track to develop quickly as car makers have been rolling out more SUVs.

Market leader Honda's CRV will be challenged by Shanghai General Motors's Captiva, and Nissan's Chinese-made Qashqai.

China's SUV market jumped 49 percent last year. It is also the fastest growing segment in the passenger car market compared with sedans, multi-purpose vehicles and mini buses.

M&A activities

The merger and acquisition between SAIC Motor Corp, China's largest auto maker, and smaller home rival Nanjing Auto marked the beginning of an aggressive consolidation in the nation's automotive industry.

Amid a government guideline that aims to enhance competitiveness against overseas rivals, more domestic players will form alliances to avoid wasting resources and to streamline operations.

Dongfeng Group, China's third-biggest auto maker, is reported to be in talks to take over Hafei Auto, which will enable Dongfeng to form a new auto powerhouse with over 1.4 million units in production capacity against First Automobile Works Corp.

Freeze

Analysts have cautioned that the market share of China's self-branded vehicles will further decline this year as more overseas car makers start to tap the low-price small-engine-sized market segment.

Chinese car makers, used to dominate the small-engine-sized vehicle and mini car segment, saw less demand from the niche market due to an upgrading of the consumption structure, according to Zheng Jun from CITIC Securities.

The market share of China's self-branded vehicles dropped from 30 percent in 2006 to 26 percent last year. Sales of domestic car makers, including Chery, Geely and BYD, came in at 1.24 million units.

Price drop

Car prices will continue to tumble in all market segments this year due to intense competition.

"People are having more options in buying new cars and the price incentives are still an effective tool to entice first time buyers," said Su Hui, general manager of Beijing Beicheng Automobile Trading.

Green cars

About 10 new energy vehicles are expected to hit the market in China this year as car makers aim aggressively to lift brand image and meet the government's demand for energy efficiency and environmental protection.

Shanghai GM will start selling its Buick LaCrosse Eco-Hybrid sedan in the middle of this year and BYD will also introduce a dual-module hybrid sedan F6 in the second half.