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Mild Growth Expected for China Auto Market
industry news
Jul 17,2012

CHANGCHUN, July 17 (Xinhua) -- Industry experts at an ongoing auto show in northeast China have said they are expecting mild growth in the Chinese auto market amid an economic slowdown at home and abroad.

As the world's largest auto producer and market, China is now under the shadow of clearly slowed economic growth, stalling consumers' purchasing habits, Li Pengcheng, PR director for FAW-Volkswagen Automotive Co. Ltd., said at the 9th China International Automobile Expo in Changchun, capital of Jilin Province.

China's GDP growth receded to 7.6 percent in the second quarter this year, the slowest in three years.

"There is no momentum for automakers to power production and marketing in the short term due to macro-economic pressures," Li warned.

Auto sales grew 2.9 percent in the first half of 2012 from a year earlier to 9.6 million vehicles, the China Association of Automobile Manufacturers (CAAM) data showed.

It indicates obvious signs of slowing down compared with the 3.4-percent gain registered in the same period last year and a 48-percent surge in the first half of 2010, CAAM said.

Even worse for domestic producers, their recent excessive capacity expansions have in many cases left little room for further growth. Local governments' measures to limit car purchases are also taking a toll on sales, Li said.

China's top three megacities have all imposed limits on car purchases, with Guangzhou capping annual issuances of license plates this month following similar schemes in both Beijing and Shanghai.

Domestic producers' share of China's passenger car market also fell to 41.4 percent in the first half, slumping further after a 3.4-percent decline in 2011.

Shenzhen-based automaker BYD Co., Ltd., failed to reach its target of selling 161,00 cars between January and June.

The sales volume of Geely, another major Chinese auto manufacturer, was also off the pace if it was still expected to hit the annual sales goal of 650,000. Neither company specified how short they fell from their targets.

"Almost every home brand has suffered sluggish sales since January. Both sales volume and market share have slipped," said Huang Haitao, Geely deputy general manager for sales.

Huang's employer acquired Volvo Cars during the heyday of China's auto market in 2010, when overall car sales jumped 32 percent annually.

After this boom in a young market, it was inevitable that China's auto sector would reach maturity and stability, said Wang Xia, director of the auto department of the China Council for the Promotion of International Trade.

The global auto industry has experienced about two decades of mild growth, Wang said. Some mature markets have even seen several rounds of decline.

In sharp contrast, manufacturers in Japan, Germany, the United States, France and the Republic of Korea have all seen faster sales increases in the first half of 2012.

German car brands, generally solid performers in China, saw an average sales increase of relatively low 20 percent in China.

Sales by Volkswagen and its Chinese partners rose more than 15 percent in the first half of this year, despite a much exposed quality dispute over some of its vehicles' transmission systems.

Discounts of global automakers recently made their models almost as affordable as domestic brands, which helped hit sales of the latter, industry insiders said.

"In addition to the price cuts, global automakers have rapidly expanded their sales networks. They are devouring market share, even in small towns," said Yu Yanjun, an auto dealer from northeast China.

"Only those who meet consumer demand, provide efficient maintenance services and establish the chain with a considerable size may win market favor," said Wang Ziwei, a sales consultant for Infiniti, a high-end brand of Japanese auto giant Nissan.

In spite of the predicted mild growth in China, car consumption trends are in the course of dramatic changes, Wang said.

China's auto market is now moving into to an era of diversification, with new models and clearer identification of consumer groups becoming more important, said Zhang Yunran, regional manager of BYD Northeast China.

In his view, first-time buyers, who were overwhelmingly big city residents in the past, are now from smaller cities or towns. Big city consumers are eyeing higher-priced or upgraded car models. Therefore, consumption tastes are shifting toward SUVs and MPVs while brand recognition and driving experience are among the key appeals, Zhang said.


China auto market
China economic slowdown
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