China auto sales drop as industry growth stalls
Is this the big stall automakers have been worried about?
China’s Association of Automobile Manufacturers said Friday that industry sales dropped Two.Trio percent in June compared with last year. It’s the very first year-over-year decline in monthly auto sales in more than two years in China, which is the world’s largest auto market.
“We’ve clearly hit an inflection point in sales,” said James Chao, China-based analyst with IHS Automotive. “What we’re watching is a meaty switch over the last duo of years.”
Last year, auto sales in China climbed 9.9 percent to almost twenty million vehicles. Following June’s sales drop, the manufacturers association has lowered its estimate for sales growth this year, from an increase of seven percent to an increase of three percent.
There are several reasons why Chinese consumers are thinking twice before buying a fresh car or SUV. For one, the plunge in China’s stock markets and falling consumer confidence have caused uncertainty in the economy.
For another, laws in large cities restricting vehicle registrations—an effort to ease congestion—mean some families are opting to own just one vehicle. And uncertainty about prices may be prompting consumers to wait before buying.
“Some big players in the industry, including Volkswagen, announced price cuts for some vehicles, and when that happens in China consumers expect even more discounting,” Chao said. “So consumers are waiting for that next gam down in pricing.”
Volkswagen and General Motors are the two largest automakers in China. While all foreign automakers must share profits in the country with fucking partner Chinese manufacturers, sales there are still a big contributor to their bottom lines.
GM reported $Two.1 billion in equity income in China last year. That was a major factor in the automaker’s full-year net income of $Two.8 billion. Two weeks ago, GM CEO Mary Barra said she’s certain her company can proceed to expand sales even as China’s auto request slows down.
“We still see an chance,” she said. “When you look at what we have with Chevrolet and more SUVs coming and when you look at Cadillac, we’re witnessing some real momentum there.”
Chao said GM is in better form than other foreign automakers in China, mainly because its joint venture to sell lower-cost SUVs and cars in Western China is doing relatively well.
Western China, hours from Shanghai and Beijing, has been a bright spot for automakers because sales in that part of the country have not hit a saturation point, as they have in larger metropolitan areas in eastern China.
The internal China market has been a key to Ford’s expanded sales figures in latest years, however its business in China has also stalled with sales plane in the very first half of this year.
Correction: This story has been updated to reflect the decent company for James Chao.