China slashed its forecast for vehicle sales in the world’s largest market, projecting deliveries to expand at the slowest pace in four years amid a stock-market rout that threatens to dent consumer sentiment. China’s auto market hasn’t seen a sales decline since February 2013. Stripping out the holiday factor, the last time China’s vehicle market posted a decline was in September 2012, when a territorial dispute between Beijing and Tokyo over a group of uninhabited islands in the East China Sea hit demand for Japanese cars.
The accumulative new vehicle sales and output year-to-May were respectively 10.24 million and 10.0 million, increasing 3.2% and 2.1% compared with the same period of last year, but falling 6.2 and 6.9 percentage points on a year-on-year basis. The body also cut its growth forecast for China’s automobile market in 2015 to 3% from the previous 7%.
“The stock market has some impact on auto sales as it hurts cash flow and less people visited 4S (dealership) stores”, CAAM chief Dong Yang told reporters.
The Chinese market is still in the black for the year, with overall sales up 8.4 percent through the first six months of the year. “Our surveys of dealers show that visiting volumes to auto showrooms dropped sharply in the first-half”, said Mr. Dong. Hyundai Motor Co.is building two more plants in China by next year, while Renault SA has a factory set to open in the first half of next year.
Automakers are facing headwinds including the slowest Chinese economy in a quarter century, a corruption crackdown which is weighing on sales of flashy cars, and a stock market slide that has squeezed the net worth of some potential buyers. Some analysts worry that a prolonged stock-market decline could further pinch consumer spending.
Demand for cars remains tepid despite auto makers offering price cuts and other incentives.
Bloomberg cited LMC Automotive researcher John Zeng as saying the growth slowdown will continue, and automakers will be more cautious.
“The painful market adjustment now under way is far from over”, he said.