It is reported that the overall 85% price hike for 2008 term contract ore together with the rising oil price has pushed up steel prices to a record high, leaving domestic auto manufacturers in dilemma for whether to promote sales to drive up market demand or raises up prices to offset the profit loss.

A salesperson from Southeast-Motor said "Oil price has gone up last week, striking a heavy blow on the already sluggish market and became the largest bearish factor. And the rampant iron ore price rise has intensified the condition.”

As per report, steel accounts for 70% of the raw materials for making automobiles. And some domestic auto producers have unveiled Mar that auto industry's aggregated profit has been reduced by 3% to 5% calculated on the 65% ore hike settled with Vale. And the much higher overall 85% price hike agreed with Rio and BHP will apparently erode the profit margin further.

Mr Zhang Xiaodong PR manager of Geely said "We will not raise sales price at the moment though cost increased, but we will never lower our price. He said that we must try hard to cover the rising cost, and improve our technology."

Many domestic auto makers have declared that they will not lift sales prices at the moment, but try hard to absorb the incremental costs internally.